The Kenya Revenue Authority (KRA) has unveiled plans to implement a real-time tax collection system integrated with cryptocurrency exchanges, aiming to expand the tax base.

KRA's Plans to Expand the Tax Base

The KRA has announced plans to implement a system for real-time monitoring and tax collection, integrated with cryptocurrency exchanges. This move aims to increase the tax base amid the growing transaction volumes, which reached $18.6 billion in 2022. Nickson Omondi, the manager at KRA for the digital economy, indicated plans to monitor transaction parameters such as type, date, and value.

Legal Aspects and Exchange Integration

Despite the lack of clear regulations by the Central Bank of Kenya and the Capital Markets Authority, exchanges like Coinbase and Binance continue to provide services in the Kenyan market, creating challenges for KRA in integrating tax systems with exchange platforms. Since 2023, changes have been introduced in Kenya requiring exchanges to remit 3% in taxes from their operations through KRA's new system.

Reporting and Tax Collection Procedures

Omondi mentioned that investors could file taxes themselves, although exchanges find it easier. Measures have been introduced for exchanges failing to remit taxes within five business days: a 5% penalty on unremitted taxes and a 1% per month interest fee. KRA collaborates with other agencies and international partners to bolster tax compliance. The 2024 Finance Bill does not bring new provisions on digital assets apart from waiving penalties for unpaid taxes.

The new cryptocurrency tax system in Kenya may significantly change the market and improve tax collection efficiency. KRA continues to address legal and technical issues in implementing the new measures.