One of the crowning achievements of the cryptocurrency industry is the adoption of these digital assets in Africa. It began in 2019 as a shaky trend but hasn’t stopped since then, as more and more countries in Africa have embraced these digital currencies. Due to this growth in adoption, there have been calls for better regulation of the industry. Consequently, the Kenyan government is working on introducing a tax initiative. The KRA (Kenya Revenue Authority) announced in August that they had come up with new regulations of ‘digital marketplaces’, which would also comprise of clearer tax rates that are operating in the crypto industry.
At that time, Bitcoin, a local news source, reported that a tax rate of 1.5% was included in the rules, which would be applicable on gross transaction value. Plus, it will be applied to exchanges and other companies. However, the rules provided came off as quite vague. It wasn’t very different from what the United States’ Internal Revenue Service (IRS) had done last October with Travel Rules. The definition of key terms was quite vague, which made it confusing to determine if industry players would also have to pay taxes.
A tax expert at the KRA, Nixon Omondi provided some clarity by confirming that the tax rate would be applicable to all Bitcoin service providers in Kenya. Omondi said that crypto classified as a digital asset and according to the law, any company offering a digital service would have to pay tax. According to him, the tax rate would be applicable on both foreign and local entities. However, it will be possible for local companies to claim their taxes at the end of the year because they will have to pay other taxes as well, in accordance with the tax laws in Kenya.
On the other hand, foreign companies will have no choice, but to remit their taxes on a monthly basis. This is just one of the African countries that have made waves in terms of crypto adoption. It is ranked top in Africa in regard to crypto adoption, but according to the Crypto Adoption Index of 2020 by Chainalysis, it holds the fifth spot. However, it should be noted that this country is not the only one that has made progress when it comes to the crypto regulatory space in the continent. Another country is Nigeria, which recently made some developments concerning regulation.
This is because cryptocurrencies were finally recognized as digital assets by its securities regulator. An official document was published by the Nigerian Securities and Exchange Commission last month, where it recognized the widespread use of crypto in the country. It acknowledged that some oversight was required because most people were using them for investment purposes. It also said that all companies would be required to register and get approval before they would be able to offer digital assets. Furthermore, they also said that regular cryptocurrencies and utility tokens would be classified as commodities in the country and assumed responsibility.