Kenya introduce digital service tax and it affects crypto transactions

Kenya Revenue Authority (KRA) has introduced a tax on all services offered in a digital market place.

The Digital Service Tax (DST) was introduced through the Finance Act 2020 and came into effect from 1st January 2021. With this tax all crypto transactions in Kenya attract a 1.5% tax.

Cryptocurrencies are yet to regulated or recognized officially in the East African country but the new policy means Kenya joins other countries around the world placing taxes on crypto transactions.

Talking about the potential impact of the policy on crypto adoption in Kenya, Reginald Alango a Kenya country representative at crypto exchange Bitzlato, told cointelegraph.com:

With regards to it having negative impact on crypto adoption in Kenya, I do not believe so as there are so many factors that are driving the rapid growth of crypto in East Africa and the youth are on the forefront pushing this. However, it’s still early to make a prediction but this is something that can monitored after the first quarter.

The Kenyan Revenue Authority states that for non-residents and companies without a permanent establishment (PE) in Kenya, the Digital Service Tax (DST) will be a final tax.

In contrast the tax will be an advance tax for residents and companies with permanent establishment (PE) in the country that they will offset against any income taxes within the course of the financial year.