KRA nets Sh10bn from 384 cryptocurrency traders
The Kenya Revenue Authority (KRA) collected Sh10 billion from cryptocurrency traders in the financial year ended June 2024, amidst its shift to digital technologies to nab individuals and entities using the virtual assets to evade taxes.
Cryptocurrencies are virtual forms of money that are not issued or regulated by any central bank around the world and are traded online to make a profit or used for cross-border payments.
KRA chairman Anthony Mwaura revealed during this year’s Taxpayers’ Day celebration on Saturday at State House, Nairobi that the cryptocurrency industry had for the first time contributed to the national tax basket.
“In the last financial year … we had 384 (cryptocurrency) customers, and they were able to contribute Sh10 billion,” Mr Mwaura said.
It is not clear whether the amount was voluntarily paid by the crypto dealers, but Mr Mwaura revealed that plans are already underway to net more taxes from the industry, which has traditionally been hard to tax.
“We have agreed with our Commissioner-General, I talked even to the Governor of Central Bank, the deputy governor so that we can have a joint technical committee to explore all the means… These people of cryptocurrencies, they want to pay taxes, but we’re unable to reach them,” said Mr Mwaura.
“If we are able to talk and agree with the central bank within this year, and be able to talk to those people who deal with Bitcoin and everything, we will be able to net Sh60 billion.”
Taxation of the crypto industry is provided for in the Finance Act of 2023, which introduced a 3.0 percent tax on the transfer or exchange of digital assets. However, there has never been a proper mechanism for tracking the transactions in the industry.
The total contribution means that within the year, the said “customers” contributed an average of Sh26 million to the taxman, translating to about Sh2.17 million every month.
It is unclear whether the “customers” the KRA chairman was referring to were natural persons or organisations, or what type of tax they paid.
The significant collection is despite a lack of a framework to tax the industry, and an existing Central Bank of Kenya (CBK) advisory cautioning commercial lenders in the country against doing business with any entities or individuals dealing in cryptocurrencies.
The Sh60 billion projected gain from netting crypto dealers would raise tax revenue by about 2.4 percent, which is enough to fund the authority’s entire expenses for a year, highlighting the potential of taxing the secretive industry.
The revelation comes after the taxman announced plans to integrate a new revenue system with crypto exchanges and marketplaces to track transactions in real-time, as part of its strategy to net more taxes from the hard-to-tax sector.
The taxman estimates that between 2021 and 2022, the country’s crypto industry transacted Sh2.4 trillion, which accounts for nearly 20 percent of Kenya’s gross domestic product.
“With this potential, it has become increasingly important for the KRA to develop a system to track and collect taxes on cryptocurrency transactions,” said the KRA.
Kenya is one of the most active crypto markets not only in Africa, but across the globe, with an estimated 729,200 cryptocurrency owners currently, according to data firm Statista.
In Africa, Kenya trails only Nigeria, South Africa, and Egypt in terms of crypto ownership, an indication of how big the market is.