Finance Bill 2025: Why gov’t is halving digital assets tax on crypto, NFTs to 1.5%

The National Treasury is slashing the three per cent levy on digital assets trade introduced in 2023 by half to 1.5 per cent in the 2025 Finance Bill.

A digital asset is anything identifiable that is created and stored digitally and has or provides value. The tax has targeted people dealing in cryptocurrencies and non-fungible tokens (NFTs), data, images, videos and written content.

Treasury Cabinet Secretary John Mbadi on Tuesday said the reduction to the levy, first introduced in the 2023 Finance Bill, aims to align it with the 1.5 per cent turnover tax levied on businesspeople whose gross turnover is between Ksh.1 million and Ksh. 25 million a year.

“Digital asset tax will be reduced from 3% to 1.5 per cent in the new budget. That is because we have turnover tax for small businesspeople, which was reduced to 1.5 per cent,” Mbadi told Citizen TV’s The Explainer program.

The minister said crypto traders have been pushing for a lower levy.

“The argument from players in the digital space has been that they are largely small businesspeople, hence the need for uniformity. Both will now be 1.5 per cent,” said Mbadi, adding that the move also aims to enhance tax compliance.

“When you have lower rates on consumption taxes, you raise more revenue, which in turn enhances revenue collection.”

Kenyan law defines a digital asset 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 or any other token of similar nature, by whatever name called.”

Crypto, a digital currency secured by cryptography on decentralised networks using blockchain technology, has continued to gain popularity globally in recent years.

Examples are Bitcoin and Binance Coin, mostly used to preserve savings, pay for goods and services internationally, and make remittances.

But while crypto and digital currency broadly are still not mainstream in Kenya compared to other disruptive digital financial services like mobile money, the government has painted a huge potential for the sector, which has an estimated four million users, according to UNCTAD figures.

In recent months, Kenya has moved to regulate the sector by introducing proposals requiring cryptocurrency firms operating in the country to set up local offices and appoint directors subject to approval by a regulatory body such as the Capital Markets Authority (CMA).

The Kenya Revenue Authority (KRA) has additionally said it will introduce a new tax system integrating real-time crypto transaction monitoring to tap into – and catch tax cheats and criminals in – the local crypto sector.

Across Africa, Nigeria, touted as home to Africa’s largest cryptocurrency market, is amending regulations to allow cryptocurrency trading and digitised transactions to be taxed.

South Africa, meanwhile, granted crypto a legal status and added crypto companies to a list of accountable institutions in 2022. 

To date, it has issued over 240 licenses to virtual assets service providers and imposes an 18 per cent capital gains tax on crypto-to-crypto trades and payments for goods or services.