The Blockchain Association of Kenya (BAK) has filed a judicial challenge to the legality and constitutionality of the Digital Asset Tax (DAT) enacted by Finance Act 2023.
The DAT, which was presented and enacted as part of the Finance Bill 2023, levies a 3% tax on digital asset exchanges beginning September 1, 2023.
According to the group, the tax also imposes stringent compliance obligations.
The filing comes after the BAK presented its opinions on the proposed tax under the Finance Bill 2023 to the National Assembly’s Departmental Committee on Finance and National Planning on May 25, 2023.
In its submission before the High Court, the BAK highlights unclear classification of digital assets, ambiguity surrounding transfers of digital assets, impractical five-day remittance timeframe, and a failure to consider loss-making transactions among others.
“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,” said The Director of Legal & Policy affairs at BAK Allan Kakai.
BAK says it is genuinely dedicated to supporting and campaigning for an environment conducive to innovation while guaranteeing legal clarity, stressing that the petition intends to address concerns regarding the DAT’s impact on both Kenyan business and the broader economy.
The matter will be mentioned on September 28, 2023.