The Kenya Revenue Authority (KRA) has clarified that its planned digital service tax (DST) will be applicable to cryptocurrencies at a rate of 1.5% on gross transaction value, local media reported.
In August, the agencyÂ announcedÂ new rules for the taxation of what it calls â€œdigital marketplaces.â€
However, with oblique definitions on such key terms, it has not been clear who exactly will be taxed under the new regulations that come into force on Jan 1, 2020.
Now, KRA tax expert Nixon Omondi has appeared to set the record straight.
â€œAs the law is, any person who will be offering a digital service â€“ crypto is digital, the platform is digital, the acquisition process is digital, the process of payment is digital â€“ in that respect, DST will be applicable on cryptocurrencies,â€ heÂ explained, in a report by Bitcoinke.
The clarification means that platforms dealing with virtual currencies will be required to pay the 1.5% tax to the Kenyan government. The situation is rather tricky for foreign peer-to-peer exchanges like Paxful and Binance P2P, which have operations in the East African country â€“ they will have to remit the tax each month.
Kenyan crypto businesses will make similar payments, too. However, local firms â€œhave the option of claiming back their digital service tax at the end of the year since they also pay other taxes within the Kenyan jurisdiction,â€ said the report.
In its original communication, the Kenya Revenue Authority stated that the digital service tax is to be paid â€œby a person who derives or accrues income from services through a digital marketplace.â€ But the term â€œdigital marketplaceâ€ proved a source of much consternation because of it being legally and technically ambiguous.
Kenyaâ€™s Finance Act offered a rather broad definition of the phrase, describing digital marketplaces â€œas a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.â€ Kenya is Africaâ€™s third-biggest bitcoin market after Nigeria and South Africa.