The amendment to the Capital Markets Act, submitted on November 21, imposes a 20% tax on crypto transactions, similar to the 20% excise duty, Kenyan banks are required to deduct from fees and commissions charged on their transactions. The new law would be the first to regulate the crypto industry in Kenya and drive it to the mainstream economy.
The bill, yet to be approved by the parliament, also requires cryptocurrency owners to provide Capital Markets Authority (CMA) with details about their digital assets for taxation purposes, specifically:
- the equivalent of their cryptocurrency in Kenyan shillings,
- the amount of proceeds from transactions,
- any costs related to transactions,
- the amount of any gains or losses on transactions,
- the type of virtual currency transacted in,
- the dates of acquiring and selling the cryptocurrency.
If the amendment goes through, Kenyans will be forced to remit capital gains tax or income tax to the Kenya Revenue Authority for "hodling" or selling crypto assets. The law reads: “Where the digital currency is held for a period not exceeding 12 months, the laws relating to income tax shall apply or for a period exceeding 12 months, the laws relating to capital gains tax shall apply.” The tax will especially affect the users of the centralized exchanges, as the local government has no jurisdiction to control non-Kenyan decentralized platforms.
According to the United Nations Conference on Trade and Development (UNCTAD) report released in June this year, Kenya has the highest percentage of citizens owning cryptocurrencies in Africa and ranks fourth worldwide, right below Singapore and right above the United States.