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The Blockchain Association of Kenya (BAK) has gone to court to stop the implementation of the Digital Asset Tax (DAT) introduced by the Finance Act of 2023. This controversial tax, set to take effect on September 1st, 2023, has raised concerns not only within the blockchain and cryptocurrency industry but also among legal experts and stakeholders.
BAK has filed a petition before the High Court of Kenya, questioning the legality and constitutionality of the DAT, and here’s what you need to know.
The Digital Asset Tax (DAT) is part of the Finance Bill 2023 and aims to impose a 3% tax on digital asset trades. While taxation itself is not inherently problematic, the DAT’s implementation has sparked outrage due to the hefty tax burden it places on digital asset transactions.
Additionally, the tax comes with a slew of compliance requirements that many consider overly burdensome.
BAK’s opposition to the DAT did not begin with the legal petition. On May 25th, 2023, the association submitted its concerns and recommendations regarding the DAT to the National Assembly’s Departmental Committee on Finance and National Planning.
In their submission, BAK highlighted several pressing issues, including the unclear classification of digital assets, uncertainties surrounding digital asset transfers, impractical remittance deadlines, and the failure to consider transactions resulting in net losses.
Allan Kakai, Director of Legal & Policy Affairs at BAK, expressed his concern over the DAT’s approach, stating, “Despite being an income tax, the impugned digital asset tax is imposed on the gross value of the digital asset. This places a tax liability even on transactions that result in net loss, rather than focusing solely on the taxation of gains and profits.”
The Blockchain Association of Kenya is dedicated to creating an environment that fosters innovation while ensuring legal clarity in the digital asset space.
BAK’s legal petition seeks to address concerns not only within the blockchain industry but also regarding the potential impact of the DAT on the broader Kenyan economy.
In the spirit of advocacy and lobbying, BAK is hosting the annual “Digital Assets Policy Safari (DAPS)” on September 19th, 2023.
This forum aims to bring together stakeholders from the financial technology ecosystem in Kenya to discuss and shape the nation’s digital asset policy. BAK encourages all players in this industry to attend and contribute to the conversation.