KRA Goes After Cryptocurrency Transactions in New Tax Strategy 

The Kenya Revenue Authority (KRA) is planning to integrate a new real-time tax system that will integrate with cryptocurrency exchanges so that crypto transactions can be tracked.

The taxman is turning to the latest technology in its bid to collect more taxes by expanding its collection base and having all Kenyans captured in the tax bracket. This is on the back of Kenya having an estimated four million crypto users, one of the highest in Africa, a matter KRA is looking to turn to in terms of broadening its tax base.

KRA was outlining its tax collection strategies for the fiscal year 2024/25 when it revealed that it would take note of transaction details such as the date, time, type, and value of each transaction.

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‍“The system shall integrate with cryptocurrency exchanges and marketplaces to track and record cryptocurrency transactions. It shall capture transaction details, including transaction date, time, type and value,” KRA outlined, noting that it is making this move based on Section 3 of Kenya’s Income Tax Act, which allows earnings from crypto transactions to be taxed.

“The goal is to have a robust and efficient system that will enable KRA to collect taxes on cryptocurrency effectively and efficiently.”

The taxman lamented that it has been unable to track as well as tax transactions due to an outdated system, a matter which has resulted in huge revenue losses on the government’s part.

In light of Kenyans turning to crypto for reasons that include preserving savings and commercial uses, KRA is stressing the importance of developing a system that will track and collect taxes on cryptocurrency transactions.

The crypto sector has been largely unregulated by Kenyan regulators including the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK), despite gaining popularity to the point that most crypto buyers and sellers in the country even accept mobile money payments to avoid regulators.

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The crypto market is known for its eye-popping price swings and has attracted young people hoping for quick returns, despite warnings from CMA and CBK that the investments can be high risk. This rising popularity can be attributed to low transaction fees, quick transactions and moderate internet penetration in Kenya.

Some blockchain analytics firms report that most Kenyans with crypto holdings buy them to preserve savings, for commercial use which includes paying for goods and services and for individual remittances to other continents, most notably the Americas and European countries.

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

It is however unclear regarding Kenya’s legal status in terms of crypto exchanges, which can make it hard for KRA to integrate its systems with the exchanges integration. 

In 2023, an amendment to the Capital Markets Act was tabled in the National Assembly to allow a capital gain tax on exchanges and an excise duty on transactions, a bill that is set to be considered by the August House after it was approved by the finance committee.

On Monday, October 14, KRA announced that it would integrate artificial intelligence (AI) to enhance its overwatch mandate on tax matters, including enhancing tax collection and identifying tax leakages, a move that could complement its new real-time tax system.

"KRA is integrating AI to streamline processes, detect fraud, and enhance compliance. AI will help identify tax leakages and provide deeper insights into revenue streams, making tax collection more efficient and accurate," the taxman said in a statement.

KRA is also aiming to empower taxpayers through taxpayer education and personalise processes that will suit them. "KRA is focused on making tax collection simpler and more transparent. By improving communication channels, offering personalised services, and enhancing taxpayer education, KRA aims to make the tax process more user-friendly and less intimidating for all Kenyans," the taxman added.

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