The Blockchain Association of Kenya has submitted a petition challenging the legality of the Digital Asset Tax (DAT), set to go into effect on September 1, 2023. The DAT, introduced by the Finance Act 2023, imposes a 3% tax on the gross value of any transfer or exchange of digital assets, including cryptocurrencies, NFTs, loyalty points, e-tickets, and other assets with value.
“Our petition aims to address concerns about the DAT’s impact on both our industry and the broader economy. Enforcement of this harsh DAT could potentially lead to adverse effects on the industry’s growth and innovation. The core focus of the petition is to thoroughly examine the legal and constitutional dimensions surrounding the imposition of this tax on digital assets. The matter will be mentioned before court on 28th September 2023,” reads a statement from BAK.
Despite warnings from the Central Bank of Kenya regarding crypto transactions by financial institutions and the general public, the Ministry of National Treasury & Economic Planning has included digital assets like Bitcoin and NFTs in the country’s tax regime through the 2023 Finance Bill. The Bill defines digital assets as intangible items of value generated through cryptographic or similar means, including non-fungible tokens. The proposed tax rate for digital asset transactions is 3% of the exchange or transfer value.
Kenya is a leader in cryptocurrency adoption in Africa and ranks fifth globally, surpassing developed countries such as the United States, China, Russia, and South Africa, according to a 2022 report from Chainalysis, an industry research firm. Only Vietnam, India, Pakistan, and Ukraine have higher overall crypto adoption rankings.