Kenya Revenue Authority (KRA) announced its plan to modify its outdated system to a more efficient one as a part of its tax system reform. The brand new system, powered by emerging technologies, is about to trace crypto transactions in real time to fight tax evasion and foster a “more transparent” organization.
KRA To Track Crypto Transactions In Real-Time
On Tuesday, local media outlets reported that Kenya’s revenue authority unveiled its plan to trace and tax crypto transactions within the country with its recent system. In a document outlining their tax collection strategies for the 2024/2025 financial 12 months, the KRA stated that the reformed system would integrate exchanges and marketplaces to assemble transaction details:
The system shall integrate with cryptocurrency exchanges and marketplaces to trace and record cryptocurrency transactions. It shall capture transaction details, including transaction date, time, type, and value.
The move is an element of the country’s tax reforms, which aim to expand the tax base and fight tax evasion. The KRA also stated that the “outdated” system has prevented the regulator from tracking and taxing digital asset transactions, which has led to a “significant lack of revenue for the federal government.”
Last week, the Kenyan regulators revealed its plan to make use of artificial intelligence (AI) and machine learning technology to research and detect tax evasion, aiming to enhance revenue collection and make it more accurate, efficient, and compliant.
Furthermore, the KRA cited Section 3 of Kenya’s Income Tax Act, which allows digital asset earnings to be taxed, claiming, “The goal is to have a sturdy and efficient system that may enable KRA to gather taxes on cryptocurrency effectively and efficiently.”
Moreover, they added that developing a system that may track and collect taxes on these transactions has change into “increasingly vital” for the regulators attributable to the industry’s adoption rate and potential.
The country has an estimated 4 million crypto users, with transactions valued at around $18.6 billion in 2022, because the regulators noted.
Kenyan Regulatory Framework
The crypto industry stays largely unregulated in Kenya despite its popularity. In a Tuesday interview with BitKE, the Manager at KRA’s Digital Economy Tax office, Nickson Omondi, discussed the country’s recent developments in digital asset taxation.
Omondi noted that there have been laws within the country that touch on the taxation of digital assets. Nonetheless, these exclusively applied to non-residents, referring to entities and multinationals without offices within the country but offering their services.
In September of 2023, there was a shift within the tax law, which aimed to bring crypto investors on board. Omondi highlighted that it was unclear before for digital asset users whether or not they were eligible for taxation on their earnings from these transactions.
Nonetheless, the present legal framework requires crypto exchanges to retain 3% of a digital asset transaction and remit it to the Kenyan government, because the Digital Economy Tax Manager explained. Omondi emphasized that the law has been clear about users being required to pay tax for his or her digital assets.
Lastly, he stated that Kenya’s different authorities are in communication about digital asset regulations, which he considers a “good thing for the industry.”
Total crypto market capitalization is at $2.22 trillion within the weekly chart. Source: TOTAL on TradingView
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