Blockchain Association of Kenya Challenges Digital Asset Tax in Court
The association’s petition seeks to address concerns about the potential ramifications of DAT for both the digital industry and the broader economy.
By Anna B Kiwanuka
The Blockchain Association of Kenya (BAK) has taken a decisive step in opposing the recently enacted Digital Asset Tax (DAT) introduced by Kenya’s Finance Act 2023. BAK has formally filed a petition before the High Court of Kenya, raising concerns over the legality and constitutionality of this new tax regime. This move comes in response to the impending enforcement of DAT, scheduled to commence on September 1, 2023.
President William Ruto signed the Finance Act 2023, a contentious piece of legislation, into law on June 20, 2023, affecting numerous parts of Kenya’s digital economy, including content creators and cryptocurrency merchants. The new law requires content providers to pay taxes on their earnings from digital productions and promotional activities. This significant adjustment in tax policy underscores the government’s desire to regulate the fast-expanding digital business, which has grown in popularity among Kenyan content creators and online influencers.
In a press release on X (formerly Twitter), BAK expressed its commitment to fostering a favorable environment for innovation while ensuring legal clarity. The association’s petition seeks to address concerns about the potential ramifications of DAT for both the digital industry and the broader economy.
The Finance Act 2023 proposed the introduction of a Digital Asset Tax (DAT), applicable to earnings generated from the transfer or trade of digital assets. These digital assets, as defined by the bill, encompass non-physical entities such as cryptocurrencies, non-fungible tokens (NFTs), and other digital representations of value. These assets are created through cryptographic methods or alternative means, enabling electronic transfer, storage, and exchange.
The DAT, as per the law, mandates platform owners to deduct a 3% tax from the value of the digital asset being transferred or exchanged. Non-resident platform owners are required to remit this tax within 24 hours of deduction.
Enforcement of the DAT has raised concerns about its potential adverse effects on industry growth and innovation. The central focus of BAK’s petition is to critically assess the legal and constitutional aspects of imposing such a tax on digital assets.
The High Court of Kenya is set to address this matter during a preliminary hearing scheduled for September 28, 2023. This legal challenge is closely watched by industry players, content creators, and cryptocurrency enthusiasts, as its outcome could have far-reaching implications for the taxation of digital assets in Kenya.
As this legal battle unfolds, Kenya’s digital landscape remains in a state of uncertainty, awaiting a resolution that will shape the future of the country’s burgeoning digital economy.