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Are you a crypto exchange, blockchain platform, or investor operating in Kenya?

If so, you’re required to comply with Kenya’s tax laws on digital assets to avoid penalties and ensure business continuity. Kenya’s Income Tax Act defines digital assets to include:

• Cryptocurrencies (e.g., Bitcoin, Ethereum)
• Tokenized assets
• Non-fungible tokens (NFTs)
• Any other digital representation of value that can be stored or transferred electronically

Whether you’re a crypto company, DeFi platform, or digital asset trader, here’s a breakdown of the key taxes you must pay in Kenya:

1. Corporate Income Tax (CIT) – 30%

Crypto companies registered in Kenya are subject to a 30% corporate income tax on their profits.

• Resident companies are taxed on global income, including revenue from foreign crypto operations.
• Non-resident companies are taxed only on income attributable to a permanent establishment (PE) in Kenya.

This tax applies to all business income generated from crypto trading, exchange services, DeFi platforms, and blockchain-based services.

2. Value Added Tax (VAT) – 16%

If your platform charges transaction, withdrawal, or exchange fees, you’re likely liable to pay 16% VAT under the Value Added Tax Act.

Applicable to:

• Centralized exchanges
• Custodial wallets
• Defi platforms offering fee-based services to Kenyan users

You must register for VAT with the Kenya Revenue Authority (KRA) and file returns on time to avoid penalties and interest during audits. However, this can change if like traditional Payment Service Providers, VASPs are also declared providers of financial services and therefore VAT-exempt.

3. Digital Asset Tax (DAT) – 3% on Gross Transaction Value (Repealed)

Introduced via the Finance Act 2023, the Digital Asset Tax (DAT) came into effect on 1st September 2023 but has since been repealed and replaced with excise duty tax on transactions.

4. Significant Economic Presence (SEP) Tax

Non-resident crypto service providers (like foreign exchanges or wallets) targeting users in Kenya are subject to SEP Tax under the Income Tax Act.

You are liable if:

• You offer digital services to Kenyan users via a website, app, or platform
• You do not have a permanent establishment in Kenya
• Your annual turnover exceeds KES 5 million

You must file SEP Tax returns and make payment to KRA by the 20th of the following month.

Exemptions:

• Services offered via a registered Permanent Establishment in Kenya
• Income already taxed under Sections 9(2) or 10 of the Income Tax Act
• Services to an airline with ≥45% Kenyan government ownership
• Turnover below KES 5 million

5. Capital Gains Tax (CGT) – Currently Exempt for Digital Assets

While CGT generally applies under the 8th Schedule of the Income Tax Act, digital assets such as cryptocurrencies and listed securities are currently exempt.

This may change with future updates to tax policy—so crypto investors should stay updated on regulatory changes from KRA and the Ministry of Finance.

Regulatory Bodies You Should Know

Kenya Revenue Authority (KRA) – Oversees tax registration, collection, and enforcement.

Capital Markets Authority (CMA) – Will license Virtual Asset Service Providers (VASPs) under the upcoming VASP Bill, 2025

Central Bank of Kenya (CBK) – Expected to regulate crypto payment systems and stablecoins.

Communications Authority (CA) – May oversee communication-based VASPs under the VASP Bill, 2025

Office of the Data Protection Commissioner – Will regulate VASPs to the extent that they handle personal data belonging to Kenyans

Final Thoughts:

Kenya is moving towards formalizing the crypto and blockchain space through licensing, regulation, and taxation. As a digital asset business or investor, understanding your tax obligations is crucial.

Need Legal Help Navigating Crypto Taxation or Licensing in Kenya?

Reach out to MasiboLaw LLP for tailored legal advice and compliance support:

📧 info@masibolaw.co.ke

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please get in touch with us at info@masibolaw.co.ke.