- Several African countries have made attempts at taxing cryptocurrencies.
- Kenya is the latest African country to announce its plan to tax cryptocurrencies.
- Here is a list of African countries that are either planning to or are already taxing cryptocurrencies.
November 2022 was the first time Kenya announced its plans to tax crypto in a bid to reduce foreign borrowing. Its plan was to amend its Capital Markets Bill to allow a 20% excise duty on all crypto transactions.
In May 2023, it reiterated its plans to tax cryptocurrencies, but with a 3% deduction on the transfer or exchange value of digital assets instead of 20%.
Interestingly, Kenya is not the only African country with plans to tax cryptocurrencies. Other countries on the continent have started or are also in the process of making some money off crypto trades. In no particular order, here is a list of African countries that tax crypto.
3 African countries that tax crypto
Kenya is the most recent country to announce its plans to tax cryptocurrencies or other digital assets.
The East African country defines digital assets as "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."
Taxation of cryptocurrencies will be done directly through crypto exchanges such as Binance.
According to the country's first announcement in 2022, 20% will be deducted from the transaction fee charged by the exchanges. However, in the latest announcement, the Kenya Revenue Authority (KRA) plans to deduct 3% from the revenue citizens make from selling crypto assets.
The KRA hasn't said exactly how this will be done, but we can take a cue from how the US' Internal Revenue Service (IRS) does it.
Per CNBC Select, the IRS has records of all activities performed on the blockchain so you can't escape crypto taxes. Gains on crypto are paid yearly. For example, if a person makes $1,000 from selling crypto in a year, tax must be paid on that.
In December 2022, Nigeria announced that it was going to tax cryptocurrencies. This is part of its Finance Bill of 2022 (PDF) which plans to put all sectors of the economy into the tax net.
While the Finance Bill is not clear on how it will tax crypto, there's a good chance it will deduct tax from gains made from cryptocurrencies.
In the Bill, cryptocurrencies were classified under the Capital Gains Act, it said, "Subject to any exceptions provided by this Act, all forms of property shall be assets for the purposes of this Act, whether situated in Nigeria or not, including options, debts, digital assets and incorporeal property generally."
According to CV VC's African Blockchain Report 2022, South Africa does not have an explicit rule on crypto taxation. However, existing rules already cover the taxation of digital assets.
The South African Revenue Service (SARS), corroborated this by saying in 2018 that it would "apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income."
This stance by the revenue service makes it clear that crypto gains or losses will be taxed. It provides some information here on how to declare these gains and losses but citizens can also reach out to SARS for clarification on the process.
Like Kenya and Nigeria, South Africa wants to track crypto transactions with the help of third-party service providers, which can also be referred to as crypto exchanges. However, there are crypto users who do not rely on these platforms for their crypto activities. They use decentralised crypto platforms that allow them to perform transactions without KYC. If the tax on crypto pushes more people to decentralised platforms, what will the government do?