Kenya is eyeing the flourishing digital economy to bridge its fiscal deficit and increase its domestic revenues. The country has proposed new taxes aimed at digital assets, such as cryptocurrencies, non-fungible tokens (NFTs) and online content creators. The move comes amid a cash crunch that has hit the East African nation.
The government has announced a new tax regime that will impact digital asset owners and content creators. Under the new system, a 3% tax will be levied on the transfer or exchange value of digital assets, while online content creators will be subject to a 15% tax on their earnings, an increase from the previous 5% withholding income tax.
Cryptocurrency exchanges, such as Binance and Yellow Card, and individuals facilitating the exchange or transfer of digital assets will be responsible for withholding tax deductions and remitting them to the country’s tax authority within 24 hours. However, before doing so, these exchanges must first register with the tax authority to remit such deductions.
The new financial bill 2023 is set to have a significant impact on the earnings of content creators as well. The proposed legislation will impose a tax on income generated by content creators who collaborate with brands to create content or promote products, as well as income from affiliate marketing.
According to the bill, content creators are defined as those who provide “entertainment, social, literary, artistic, educational, or any other material electronically” via websites or social media platforms in partnership with brands or retailers.
If passed, the new legislation will require content creators to pay tax on any earnings generated through sponsored content or affiliate marketing partnerships. This move is seen as an attempt by the Kenyan government to increase revenue collection from the digital economy.
Earnings made from subscription services, merchandise sales, eBooks, courses, or software will also be taxed. Income from membership programmes for exclusive content, licensing content, or crowdfunding for raising funds for specific goals for a content creator or another person will also be subject to taxation.
The proposed taxes are outlined in the Finance Bill 2023, which is set to take effect in the next budget year beginning on July 1, pending ratification. The move is expected to help Kenya generate more income as the digital economy continues to grow.
The new tax regime is expected to boost the country’s revenue by capturing previously untaxed transactions in the digital asset market and online learning activities.
Kenya’s tax plan is part of a global trend, as governments around the world are grappling with how to tax the rapidly expanding digital economy. As more and more transactions take place online, countries are seeking to ensure that they capture their fair share of revenue from digital assets.
The bill has generated mixed reactions, with some content creators expressing concern that the tax will impact their income negatively. Others have welcomed the move, arguing that it will help to regulate the digital content market and ensure fair taxation.
The proposed legislation is still under review, and it remains to be seen how it will be received by content creators and other stakeholders in the digital economy.
New tax regime imposes charges on digital assets and online earnings. However, we will wait to see how the tax measures will affect the adoption and usage of digital assets in the country.
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