Introduction

The Blockchain Association of Kenya (BAK) has filed a petition to challenge the legality of Digital Asset Tax (DAT) which is meant to commence today, September 1.

Petition Details

“The core focus of the petition is to thoroughly examine the legal and constitutional dimensions surrounding the imposition of this tax on digital assets,” says S.A Kakai, BAK’s legal and policy director. According to Kakai, the association will appear in court on September 28, for the “mention of our interim application”.

About Digital Asset Tax

The Digital Asset Tax was introduced in the country’s 2023 Finance Act. The act imposes a 3% tax on the transfer or exchange value of digital assets.

According to the act, digital assets refer to “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 a non-fungible token (NFTs) or any other token of similar nature, by whatever name called”.

Opposition to Digital Asset Tax

Earlier in March, BAK outlined seven reasons opposing the Digital Asset Tax. They include unclear classification of digital assets, ambiguity surrounding transfers of digital assets, and failure to consider loss-making transactions. “The volatility and speculative nature of digital assets mean that not all transfers and exchanges result in profits. Ignoring this aspect could lead to unfair taxation and hinder the growth of the industry,” the association said.

Regulation Requirements