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Kenya’s Tax Authority to Track and Tax Crypto Transactions

October 15, 2024

Kenya’s tax authority to track and tax crypto transactions with real-time tax system with cryptocurrency exchanges and marketplaces, allowing it to monitor and record transactions.

KRA stated this while outlining its tax collection strategies for the fiscal year 2024/25, adding that it will capture transaction details such as the date, time, type, and value of each transaction.

The tax authority expressed that it has been unable to track and tax transactions due to an outdated system, which has caused the government significant revenue losses.

The authority, however, is making this move citing 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,” KRA stated.

Considering Kenya’s increasing interaction with crypto for reasons such as preserving savings and commercial uses, KRA sees it as increasingly important to develop a system to track and collect taxes on cryptocurrency transactions.

AI and Machine Learning to analyze data and detect tax evasion

Last week, the KRA announced plans to use technologies like Artificial Intelligence (AI) and Machine Learning to analyze data and detect tax evasion. The authority aims to improve revenue collection, making it more efficient, accurate, and compliant through emerging technologies.

Additionally, AI and Machine Learning will optimize resource allocation, predict future revenue streams, and help foster trust and transparency within the tax system.

Moreover, the government plans to use M-PESA Paybills and Till numbers as virtual Electronic Tax Registers (ETRs) starting 25 December 2024. This move is part of the country’s broader tax reforms to widen the tax base and remediate evasion.

Kenya’s plan to switch to a real-time tax system that will integrate with cryptocurrency exchanges and marketplaces comes as a tax evasion case involving a prominent crypto exchange, Binance, remains unresolved in Nigeria.

In March 2024, Nigeria’s Federal Inland Revenue Service (FIRS) filed tax evasion charges against Binance, claiming that the cryptocurrency platform had contravened four tax laws and failed to register with the authorities for tax purposes.

Initially, two of Binance’s executives detained in Nigeria—one of whom escaped—were named in the charges. However, they have since been dropped, making Binance the sole defendant in the case. The matter is yet to be resolved.

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