By 
The Blockchain Association of Kenya (BAK) is taking legal action to halt the implementation of the Digital Asset Tax (DAT), which was introduced a few months ago through the Finance Act 2023. The case is scheduled for a court mention on September 28.
The newly imposed tax, effective as of September 1, is one of several taxes introduced in the Finance Act 2023, aimed at expanding taxation within the digital space. The tax provisions outlined in the act, which has already been signed into law, are expected to generate additional revenue of up to $2 billion for the Kenyan government.
BAK has clarified its reasons for challenging the legality of the tax, stating, “We are deeply committed to advocating and lobbying for a conducive environment for innovation while ensuring legal clarity. Our petition addresses concerns about the DAT’s impact on our industry and the broader economy.”
Allan Kakai, the Legal and Policy Director at BAK, pointed out that DAT has been categorized as income tax, yet it is imposed on the gross value of the asset rather than on gains and profits. “This means that people in a loss-making position will still pay the tax. It is unfair and inequitable to impose a tax on losses,” Kakai told TechCabal.
The Finance Act introduced DAT for earnings generated from digital asset transfers. Digital assets are defined as intangible value, encompassing cryptocurrencies and electronically exchangeable digitally-represented tokens. Non-resident platform owners for asset exchanges must register under a simplified tax scheme, similar to the Digital Services Tax. According to this law, platform owners are required to deduct 3% of the asset’s value as DAT. Non-resident owners must remit this tax within 24 hours, along with the necessary details. The 24-hour remittance requirement could pose a burden for some, and taxing turnover rather than gains might discourage digital asset trading.
The Blockchain Association of Kenya argues that the tax could stifle innovation and hinder the growth of services associated with blockchain and cryptocurrencies. “The core focus of the petition is to thoroughly examine the legal and constitutional dimensions surrounding the imposition of this tax on digital assets,” the association stated in a release posted on X (formerly Twitter).
The Finance Act 2023 has also introduced taxation for online content creators. Previously, a 15% withholding tax was imposed on earnings from digital content monetization. However, Kenya’s parliament later reduced this to 1.5%. Starting from July 1, whenever a content creator receives payment for their work, the client is required to withhold 1.5% of the payment and remit it to tax authorities. This change reflects an effort to expand taxation to include digital content enterprises, acknowledging their significant growth in recent times.
Comments