The Finance Bill 2023 proposes to amend the Income Tax Act by introducing a digital assets tax on income made from a transfer or exchange of digital assets.

Digital assets are defined as: “(i)anything of value that is not tangible and cryptocurrencies, token code, number held in digital form and generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration that can be transferred, stored or exchanged electronically; and (ii) a non-fungible token or any other token of similar nature, by whatever name called”

The proposed amendment further requires that the owner of a platform or the person who facilitates the exchange or transfer of a digital asset to deduct a withholding tax and to remit it to KRA within 24 hours.

While this may adversely affect the cost of transacting in digital assets business, it is a positive pointer to the nation’s appreciation of the growing economic arena in digital assets and a step forward towards efforts to bring the digital assets space under the ambit of regulation