The Kenya Revenue Authority (KRA) has announced its plan to transform its outdated system into a more efficient one as part of an overhaul of its tax system. The new system, powered by emerging technologies, is set to track cryptocurrency transactions in real time to combat tax evasion and promote a “more transparent” organisation.
KRA to track cryptocurrency transactions in real time
Local media, Tuesday I mentioned The Kenya Revenue Authority has revealed its plan to track and tax cryptocurrency transactions in the country through its new system. In a document outlining tax collection strategies for the 2024/2025 financial year, KRA stated that the reformed system will integrate exchanges and markets to collect transaction details:
The system must integrate with cryptocurrency exchanges and markets to track and record cryptocurrency transactions. It must capture transaction details, including the date, time, type, and value of the transaction.
This step comes within the framework of the country’s tax reforms, which aim to expand the tax base and combat tax evasion. KRA also stated that the “archaic” system prevented the regulator from tracking and taxing digital asset transactions, resulting in a “significant loss of revenue for the government.”
Last week, Kenyan regulators unveiled their plan to use artificial intelligence and machine learning technology to analyze and detect tax evasion, with the aim of improving revenue collection and making it more accurate, efficient and compliant.
Furthermore, the KRA cited Section 3 of the Kenyan Income Tax Act, which allows for the taxation of digital asset gains, claiming that “the goal is to have a robust and efficient system that will enable the KRA to collect taxes on cryptocurrencies effectively and efficiently.”
Additionally, they added, developing a system that can track and collect taxes on these transactions has become “increasingly important” for regulators given the industry’s rate of adoption and potential.
The country has an estimated four million cryptocurrency users, with transactions worth around $18.6 billion in 2022, regulators noted.
Kenyan regulatory framework
The cryptocurrency industry remains largely unregulated in Kenya despite its popularity. In an interview on Tuesday with BitKE, Director of the KRA Digital Economy Tax Office, Nixon Omondi, discussed the country’s recent developments in the area of taxation of digital assets.
Almonds male There are laws in the country related to taxation of digital assets. However, these apply exclusively to non-residents, referring to multinational entities and companies that do not have offices in the country but provide their services.
In September of 2023, there was a shift in the tax code, which aims to attract cryptocurrency investors. Omondi stressed that it had not previously been clear to users of digital assets whether they were eligible to be taxed on their profits from such transactions.
However, the current legal framework requires cryptocurrency exchanges to retain 3% of digital asset transactions and remit them to the Kenyan government, the Digital Economy Tax Director explained. Omondi stressed that the law was clear about requiring users to pay taxes for their digital assets.
Finally, he mentioned that various Kenyan authorities are communicating on digital asset regulations, which he considers “a good thing for the industry.”
Total crypto market capitalization is at $2.22 trillion in the weekly chart. Source: TOTAL on TradingView
Featured image from Unsplash.com, chart from TradingView.com
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