Will the New Tax on Digital Marketplaces and the Informal Sector Affect the Crypto Space in Kenya?

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The Kenya Revenue Authority (KRA) is expected to start taxing digital marketplaces and the informal sector in Kenya following the president assenting to the Finance Bill 2019.

The new bill now allows the taxman to go after digital marketplaces in Kenya as well as the informal sector by re-introducing the turnover tax of 3% of a firm’s revenues.

In addition, low-income informal workers, which includes guards, drivers, and cleaners will not be charged a 5% withholding tax.

Due to a lack of proper regulation on the crypto and blockchain space, the crypto industry in Kenya has remained largely informal. In addition, the Central Bank of Kenya (CBK) has maintained its stand by not recognizing, and therefore unable to regulate, crypocurrencies like Bitcoin in the country.

Recent statistics have shown that Kenya is ranked 3rd among African countries with the highest Bitcoin usage as of 2019 after Seychelles and South Africa.

Taxation on the emerging digital economy has been a targeted for the taxman in 2019 having resolved this at the 2018 KRA Annual Summit. The tax authority has also been looking at how to tax transactions done using cryptocurrencies and has requested the Central Bank of Kenya recognize these emerging technologies for taxation.

The Communications Authority of Kenya has also warned of a coming VAT on income-generating applications in Kenya. In addition, foreign online streaming media services like YouTube and Netflix and other over-the-top (OTT) services will also be required to declare their incomes derived from their Kenyan consumers.

It will be interesting to see how the digital and informal crypto sector in Kenya will be included in the tax bracket.

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