KRA collects Sh10 billion from cryptocurrency traders for the first time

The Kenya Revenue Authority (KRA) collected Sh10 billion from cryptocurrency traders during the financial year that ended in June 2024.

Speaking during the annual Taxpayers' Day celebration at State House, Nairobi, KRA chairman Anthony Mwaura disclosed that this marks the first time the cryptocurrency industry has contributed to the national tax revenue.

"In the last financial year, we had 384 cryptocurrency customers, and they were able to contribute Sh10 billion," Mwaura said.

Cryptocurrencies, which are digital forms of currency not issued or regulated by central banks, are primarily traded online for profit or utilised for cross-border payments.

On average, the reported "customers" contributed Sh26 million each to the tax revenue over the year, equating to about Sh2.17 million monthly. It is not specified whether these customers are individuals or organisations, nor what types of taxes they remitted.

However, Mwaura indicated that plans are in motion to secure additional taxes from an industry that has historically posed challenges for tax collection.

"We have agreed with our Commissioner-General, and 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," he said.

He noted that if discussions with the Central Bank of Kenya (CBK) are successful this year, along with engagement with Bitcoin traders and others in the cryptocurrency space, the Kenya Revenue Authority could potentially collect Sh60 billion from the industry.

"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," he said.

No proper tracking mechanism

Taxation of the crypto sector is outlined in the Finance Act of 2023, which imposed a three per cent tax on the transfer or exchange of digital assets. However, a proper mechanism for tracking these transactions remains absent.

The significant revenue comes amid KRA's transition to digital technologies aimed at identifying individuals and entities using virtual assets to evade taxes.

The substantial collection is notable given the lack of a robust framework for taxing the cryptocurrency industry, alongside an advisory from the CBK warning commercial lenders against engaging with cryptocurrency businesses.

If the projected Sh60 billion taxation materialises, it would represent an increase of approximately 2.4 per cent in tax revenue, sufficient to cover the KRA's annual operational expenses, underscoring the potential of this market.

According to KRA estimates, the country’s crypto industry transacted Sh2.4 trillion between 2021 and 2022, representing nearly 20 per cent of Kenya's gross domestic product.

The Authority had announced that it plans to implement a new revenue system integrated with cryptocurrency exchanges and marketplaces to facilitate real-time transaction tracking, enhancing its capability to tax this difficult-to-assess sector.

"With this potential, it has become increasingly important for the KRA to develop a system to track and collect taxes on cryptocurrency transactions," KRA said.

Kenya ranks as one of the most active cryptocurrency markets globally and within Africa, with approximately 729,200 cryptocurrency owners, according to data from Statista. In the African context, Kenya is outpaced only by Nigeria, South Africa, and Egypt in terms of crypto ownership, reflecting the market's significant growth potential.