Digital Assets Tax in Kenya

Last updated April 26, 2025

Overview

Cryptocurrencies have rapidly gained popularity worldwide, including in Kenya, as a new form of digital assets. Over the years, the taxation of cryptocurrencies in Kenya has evolved, from being taxed as ordinary income or capital gains to a more transaction-based approach. 

The recent Finance Act of 2023 brought about significant changes in how cryptocurrencies are taxed, aiming to provide clarity and structure to this burgeoning industry. In this blog post, we'll explore the key aspects of the taxation of cryptocurrencies in Kenya and what it means for stakeholders in the crypto space.

The New Taxation Framework

Until recently, the taxation of cryptocurrencies in Kenya was primarily based on whether individuals were actively trading or not. Active traders were subject to ordinary income tax, while those not actively involved in trading fell under the capital gains tax regime. The determination of which category applied was influenced by the badges of trade.

However, the landscape changed dramatically with the Finance Act of 2023. This act introduced a new taxation approach for cryptocurrencies in Kenya. As of September 1, 2023, all cryptocurrency transactions are subject to a fixed tax rate of 3%. This means that every time a cryptocurrency is bought, sold, exchanged, or transferred, a 3% tax is charged on the transaction amount. The tax is not based on gains.

What Constitutes a Digital Asset in Kenya?

The Finance Act of 2023 defines a digital asset in Kenya as "anything of value that is not tangible and cryptocurrencies, token code, number held in digital form and generated through cryptographic means or otherwise." This comprehensive definition includes tokens, and non-fungible tokens (NFTs) and is designed to cover both current and future forms of digital assets within the crypto industry.

Types of Transactions Subject to Digital Asset Tax

Under the new digital asset tax, several types of cryptocurrency transactions are subject to the 3% tax, including:

• Airdropped tokens

• Sale of tokens for stable coins (e.g., selling Bitcoin for USDT)

• Sale of tokens for another token (e.g., Bitcoin for Ethereum)

• Purchase of a token with another token (e.g., buying Grok with Shiba Inu)

• Purchase or sale of NFTs

Tax Collection Responsibility

The Finance Act places the responsibility of tax collection on transaction facilitators, such as centralized and decentralized exchanges, as well as project teams distributing rewards to Kenyan participants. These facilitators are required to deduct the digital asset tax from the transaction and remit it to the Kenya Revenue Authority (KRA).

How Digital Asset Tax is Paid to KRA

Platform owners facilitating cryptocurrency transactions have to register with the Kenya Revenue Authority to obtain a Tax PIN ID. This allows them to then file returns and provide the necessary information to the authority.

Tax withheld from transactions have to be paid within five working days and in Kenyan Shillings (Ksh). This necessitates the conversion of withheld tokens into a chosen stable coin and further conversion into Ksh based on exchange rates provided by the Central Bank of Kenya for that specific day. 

Given the 24/7 nature of crypto trading, platforms must file returns daily and maintain reliable local representatives in Kenya for strict compliance.

Risks of Non-Compliance

Non-compliance with digital asset tax in Kenya can have significant consequences. The Kenya Revenue Authority can take measures to recover unpaid taxes and impose interest on the platforms. Additionally, the authority may issue agency notices to the Communication Authority of Kenya to block access to non-compliant platforms, leading to potential disruption of services. 

Furthermore, non-compliance can result in reputational damage, affecting the trustworthiness of crypto platforms in the eyes of users.

Conclusion

In conclusion, the taxation of cryptocurrencies in Kenya has undergone a transformation with the introduction of the Finance Act of 2023. The 3% tax on crypto transactions represents a new approach to regulating this dynamic and evolving industry. 

To avoid costly repercussions, platform owners and other stakeholders must ensure compliance with the new taxation framework and work closely with the Kenya Revenue Authority to meet their obligations. 

As cryptocurrencies continue to gain prominence, it is essential for the crypto community in Kenya to stay informed and adapt to the changing regulatory landscape.

Written by Joseph Wachira
The author is a Crypto Tax Consultant and can be reached via wachira@cryptotax.co.ke