Bitrabo Editorial
The Kenya Revenue Authority (KRA) has revealed its intention to upgrade its aging system as part of ongoing tax reforms. This new system, utilizing advanced technologies, will monitor cryptocurrency transactions in real-time to combat tax evasion and enhance organizational transparency.
KRA Set to Monitor Crypto Transactions Instantly
On Tuesday, it was reported by various local media outlets that the KRA has initiated a strategy to effectively track and tax cryptocurrency transactions within the nation. As detailed in their tax collection plan for the financial year 2024/2025, the KRA plans to connect with exchanges and marketplaces to capture transaction information:
This system will interface with cryptocurrency exchanges and marketplaces to monitor and log cryptocurrency activities, capturing essential details such as transaction date, time, type, and value.
This initiative is part of the broader tax reform efforts aimed at broadening the tax base and reducing tax evasion. The KRA has pointed out that its previous, outdated system hindered its ability to detect and tax digital asset transactions, resulting in considerable revenue losses for the government.
Recently, Kenyan authorities disclosed plans to leverage artificial intelligence (AI) and machine learning to identify and prevent tax evasion, thereby enhancing the precision and efficiency of revenue collection.
Additionally, the KRA referred to Section 3 of Kenya’s Income Tax Act, which permits the taxation of earnings from digital assets, stating, “The aim is to establish a strong, efficient framework for effectively collecting taxes on cryptocurrency.”
Furthermore, they highlighted the necessity of developing a system that can oversee the taxation of cryptocurrency transactions due to the rising adoption and potential of the industry.
Kenya reportedly has around four million cryptocurrency users, with transactions estimated at $18.6 billion in 2022, according to regulatory insights.
Current Status of Cryptocurrency Regulations in Kenya
Despite the growing interest in cryptocurrency, the sector remains largely unregulated in Kenya. In an interview on Tuesday, KRA’s Digital Economy Tax office manager, Nickson Omondi, shared insights on the evolving taxation landscape for digital assets.
Omondi pointed out that existing laws addressing digital asset taxation had previously only applied to non-residents, specifically foreign entities and multinationals operating without a local presence.
In September 2023, a significant adjustment in tax law occurred to include cryptocurrency investors. Omondi emphasized the previous ambiguity surrounding the taxation status of digital asset users.
Currently, the legal framework mandates that cryptocurrency exchanges withhold 3% of each digital asset transaction for the Kenyan government, as clarified by the Digital Economy Tax Manager. He reaffirmed the obligation for users to pay taxes on their cryptocurrency earnings.
Omondi concluded by noting that various Kenyan authorities are collaborating on digital asset regulation, which he views positively for the evolving industry.