Authority in Kenya has introduced Digital Service Tax payable for by those who derive income from services through cryptocurrency market place.

In a tweet, the Kenya Revenue Authority (KRA) says, “Introduction of Digital Service Tax (DST) Payable by a person who derives or accrues income from services through a digital market place at the rate of 1.5% of the gross transaction value.”

The new digital tax is expected to take effect January 1, 2020, KRA said, pointing out that a special tax unit to track and tax transactions using “data-driven detection” would be launched.

There are no details as par who would be affected by the new tax regulation and a report stated that “at this stage, the precise meaning of a digital market place and those who will be impacted by the digital tax is unclear.”

Introduction of Digital Service Tax (DST)

Payable by a person who derives or accrues income from services through a digital market place at the rate of 1.5% of the gross transaction value. @KRACare

Effective Date: 1st January 2021. #FinanceAct2020

— Kenya Revenue Authority (@KRACorporate) August 6, 2020

Cryptocurrency Growth in Kenya

In one of the newsletters by a digital assets trading platform, IQ Option noted that Kenyans’ interest in digital assets is growing exponentially.

“Still, other countries are developing fast and can pleasantly surprise you if you choose to work with them,” IQ Option says in a report which places Kenya number seven.

The data further reveals that the conversion rate (CR) to first-time deposit (FTD) in trading digital assets are growing rapidly.

Digital marketplace in Kenya

Kenya’s Finance Act broadly defines digital marketplace “as a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.”

It’s unknown if trading platforms and their traders would be affected by the new digital tax law.

Cryptocurrency platforms “fall under the digital marketplace designation since they offer a platform for buyers and sellers of crypto through electronic means.”

Since cryptocurrency gained incredible popularity, KRA had convinced the central bank in the country to recognize digital assets for revenue collection purposes.

Commenting on the lack of clarity of the new regulations, David Gitonga, founder & Managing Editor at Bitcoinke, says the digital tax will nudge Kenya towards the regulation of cryptocurrencies.

“I think this bill is going to put a spotlight on many digital activities, including crypto trading, and this might open the door to some form of crypto regulation,” bitcoin news quoted Gitonga as saying.

He stated that “crypto regulation has long been ignored because there is a general lack of understanding of how fast this space is growing in Kenya.”

In a report by the BBC in 2019, Kenya is ranked as one of the top five African countries with high volumes of Peer-to-Peer (P2P) bitcoin trading.

The new development would mean that revenue from the digital tax would add flesh to revenue of the country.

Gitonga also believes that the government “will now give the crypto space a second look once they realise revenues that are being generated, especially on P2P platforms operating in Kenya.”

At the time of this report, Digital Service Tax in generating reactions among Kenyans on social media, just as the bitcoin was trading at $11,768.