Kenya Revenue Authority (KRA) announced its plan to switch its outdated system to a more efficient one as part of its tax system reform. The new system, powered by emerging technologies, is set to track 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 track and tax crypto transactions in the country with its new system. In a document outlining their tax collection strategies for the 2024/2025 financial year, the KRA stated that the reformed system would integrate exchanges and marketplaces to gather transaction details:
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.
The move is part 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 The KRA also stated that the “outdated” system has prevented the regulator from tracking and taxing digital asset transactions, which has led to a “significant loss of revenue for the government.”
Last week, the Kenyan regulators revealed its plan to use artificial intelligence (AI) and machine learning technology to analyze and detect tax evasion, aiming to improve revenue collection and make it more accurate, efficient, and compliant.
Moreover, 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 robust and efficient system that will enable KRA to collect taxes on cryptocurrency effectively and efficiently.”
Additionally, they added that developing a system that can track and collect taxes on these transactions has become “increasingly important” for the regulators due to the industry’s adoption rate and potential.
The country has an estimated four million crypto users, with transactions valued at around $18.6 billion in 2022, as the regulators noted.
Kenyan Regulatory Framework
The crypto industry remains 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 in the country that touch on the taxation of digital assets. However, these exclusively applied to non-residents, referring to entities and multinationals without offices in the country but offering their services.
In September of 2023, there was a shift in the tax law, which aimed to bring crypto investors on board. Omondi highlighted that it was unclear before for digital asset users whether they were eligible for taxation on their earnings from these transactions.
Nonetheless, the current legal framework requires crypto exchanges to retain 3% of a digital asset transaction and remit it to the Kenyan government, as the Digital Economy Tax Manager explained. Omondi emphasized that the law has been clear about users being required to pay tax for their 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 in the weekly chart. Source: TOTAL on TradingView
Featured Image from Unsplash.com, Chart from TradingView.com
Source: https://bitcoinist.com/kenyas-revenue-authority-to-track-crypto-transactions-with-real-time-tax-system/