The new Digital Asset Tax, which came into effect on September 1, faces opposition after the Blockchain Association of Kenya (BAK) filed a petition to challenge its legality.
In its petition filed at the High Court, BAK seeks to block the implementation of the tax enshrined in the Finance Act 2023.
“The Block Chain Association of Kenya (BAK) has officially filed a petition before the High Court of Kenya, challenging the legality and the constitutionality of the Digital Asset Tax (DAT),” the BAK notice seen by Kenyans.co.ke read.
BAK is also seeking clarification on the constitutional dimensions surrounding the imposition of the tax, which will see Kenyans charged 3 per cent on the income derived from the sale of digital assets.
A photo of the statue outside the Nairobi Law Courts
BAK further argues that the introduction of the Digital Assets Tax would cripple the country’s cryptocurrency sector, terming the new tax “harsh” and potentially detrimental to the digital industry’s progress.
“Enforcement of this harsh DAT could potentially lead to adverse effects on the industry’s growth and innovation.”
“We are deeply committed to advocating and lobbying for a conducive environment for innovation while ensuring legal clarity,” BAK added.
The case is set to be mentioned on Thursday, September 28 2023.
The Finance Act 2023 introduced DAT as a tax for gross earnings from digital asset transfers.
A digital asset is a product created and stored digitally, that is identifiable, discoverable, and has value. These include crypto and digitally represented tokens exchangeable electronically.
According to the Finance Act 2023, crypto, Non-Fungible Tokens (NFTs), e-tickets, and potentially any digital asset holding value are subject to taxation.
Traders are expected to submit the amount charged to the Kenya Revenue Authority (KRA) within five working days, every month.
A photo of Kenya National Assembly.
Parliament of Kenya