It has been reported that the DST is part of the country’s 2020 revamped Finance Act that focuses on the digital services market among other sectors.
However, based on the provisions of the new tax regime, e-market transactions including cryptocurrency payments now attract a 1.5% levy.
Reginald Alango, a Kenya country representative at Bitzlato, a noncustodial peer-to-peer crypto exchange, said that the new tax policy prescribes a 1.5% tax on the gross transaction value of every crypto sale.
“With regards to it having negative impact on crypto adoption in Kenya, I do not believe so as there are so many factors that are driving the rapid growth of crypto in East Africa and the youth are on the forefront pushing this. However, it’s still early to make a prediction but this is something that can be monitored after the first quarter [of 2021].”
The Kenyan Revenue Authority (KRA) stated the DST will serve as the final tax payment for non-residents and companies not domiciled in the country. Residents and companies with offices in the country will see their DST payments offset against any income taxes levied during the year.
Kenya's digital tax regime comes into effect covering crypto transactions but the industry is no closer to government recognition. https://t.co/2mBJ3rNAnw — Cointelegraph (@Cointelegraph) January 8, 2021
Likewise, Kenya’s policymakers said that the new tax policy will do little to affect digital services startups in the country.
Also, the KRA argued that the DST will ensure that foreign firms remit part of their earnings in the country to the government. The new policy places Kenya among the group of countries officially levying taxes on crypto transactions, as cryptocurrencies have yet to obtain any legal status in the country.
Thus, Alango said:
“A lot of things have to be considered if Kenya is to legalize cryptocurrency and as we currently speak the Central Bank of Kenya does not recognize it despite the fact that Kenya is ranked third in Africa in terms of Bitcoin market.”