The Blockchain Association of Kenya (BAK) is taking a stand against the recently introduced Digital Asset Tax (DAT) in Kenya. In a bold move, the association has filed a petition before the High Court of Kenya, questioning the legality and constitutionality of this new tax, which was introduced as part of the Finance Act 2023.
The Digital Asset Tax, which is set to take effect on September 1st, 2023, imposes a 3% tax on digital asset trades. While taxation is a common practice, what has raised eyebrows are the onerous compliance requirements that come with it.
BAK’s journey to this legal challenge began on May 25th, 2023, when they submitted their initial concerns regarding the proposed Digital Asset Tax under the Finance Bill 2023 to the National Assembly’s Departmental Committee on Finance and National Planning. In this submission, BAK pointed out several areas of ambiguity and concern.
One of the primary issues highlighted by BAK was the unclear classification of digital assets. The lack of clarity around how different types of digital assets are categorized and taxed has been a source of confusion within the industry.
Another major concern is the ambiguity surrounding the transfer of digital assets. This lack of clarity can create uncertainty and potential pitfalls for those involved in digital asset transactions.
The impractical 5-day remittance timeframe was also brought to the forefront. BAK argued that such a short window for compliance could lead to unintended consequences and hinder the growth of the digital asset industry in Kenya.
Perhaps one of the most contentious points raised by BAK was the taxation of the gross value of digital assets. Unlike traditional income tax, which focuses on gains and profits, the Digital Asset Tax imposes a tax liability on the entire value of a digital asset, even if a transaction results in a net loss. Allan Kakai, Director of Legal & Policy Affairs at BAK, emphasized the need for a tax system that accounts for the actual profits made from digital asset transactions.
BAK’s petition isn’t just about challenging the tax; it’s about creating a conducive environment for innovation while ensuring legal clarity within the digital asset space. They believe that the current tax framework could have a significant impact on both the industry and the broader economy.
This legal battle is set to unfold in the High Court of Kenya, with the matter scheduled for mention on September 28th, 2023. It’s a pivotal moment for the digital asset industry in Kenya, and the outcome will likely have far-reaching implications.
In their ongoing efforts to shape Kenya’s national digital asset policy, BAK is hosting the annual “Digital Assets Policy Safari (DAPS)” on September 19th, 2023. This forum invites all stakeholders
