The Kenya Revenue Authority (KRA) has unveiled a significant reform to modernize its tax system, with a focus on tracking cryptocurrency transactions in real-time. The overhaul aims to combat tax evasion and foster greater transparency, leveraging cutting-edge technologies like artificial intelligence (AI) and machine learning.
KRA Targets Crypto To Expand Tax Base
Local reports confirmed the KRA’s intent to roll out a new system during the 2024/2025 financial year to address shortcomings in its current outdated infrastructure. The new platform will integrate with crypto exchanges and marketplaces, providing KRA with real-time access to transaction data. This initiative seeks to expand Kenya’s tax base and recover revenue lost due to the inability to track digital asset activities.
The KRA cited Section 3 of the Income Tax Act, which empowers the agency to tax digital asset earnings. The regulator emphasized that creating a robust system is “increasingly important” given the rapid adoption of cryptocurrencies and their potential economic impact. With approximately 4 million crypto users and transactions totaling $18.6 billion in 2022, Kenya’s regulators are positioning themselves to secure a slice of this booming market.
AI-Powered Tax Collection for Accuracy and Efficiency
In its latest push, the KRA revealed plans to deploy AI and machine learning tools to detect and prevent tax evasion more effectively. The system aims to improve compliance, ensuring that taxes are collected accurately and efficiently from crypto investors. These advanced technologies will also allow the regulator to monitor transactions in real-time, making it easier to enforce existing laws.
According to Nickson Omondi, the Manager of KRA’s Digital Economy Tax Office, previous regulations focused primarily on non-resident entities. However, the tax framework was revised in September 2023 to bring individual crypto investors under the tax net.
New Tax Law Requires Crypto Exchanges to Remit 3%
The updated tax framework mandates crypto exchanges operating in Kenya to withhold 3% of every digital asset transaction and remit it to the government. Omondi confirmed that the law clarifies tax obligations for both users and platforms, reinforcing the need for compliance in the growing digital economy.
Omondi also highlighted the ongoing collaboration between different regulatory bodies in Kenya to establish a cohesive framework for digital assets. “It’s a positive step for the industry,” he remarked, emphasizing the importance of clear guidelines for market participants.
Kenya’s new tax system signals a turning point for the nation’s crypto landscape. By embracing real-time tracking powered by AI, the KRA aims to close loopholes, expand the tax base, and ensure fairness in the rapidly evolving digital economy. As more details emerge, the move is likely to spark discussions on the impact of taxation on Kenya’s vibrant crypto ecosystem.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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