Kenya’s Finance Bill 2023, recently passed and signed into law, impacts digital content creators, crypto traders, and digital lenders. Content creators will now face taxes on their earnings, while crypto traders will be subject to a digital asset tax.

Kenya’s controversial Finance Bill 2023 is now law after the national assembly passed the proposal, which was signed by President William Ruto. The bill affects many people in the digital space, including content creators and crypto traders. Content creators, for instance, will now have to pay tax based on the earnings they get from their work. The government has possibly been eyeing the industry ever since it gained popularity among thousands of Kenyans who create content for their social media pages. Some creators are also paid handsomely by the brands they push on their platforms, and part of their earnings will now be subject to some tax.

READ MORE: Kenya’s government proposes new bill to tax content creators

Online influencers could lose big earnings

The law defines “digital content monetisation” as offering entertainment, social, literary, artistic, educational, or other material electronically through any medium or channel for payment. This can be done through various methods, including website advertisements, social media platforms, brand sponsorships, affiliate marketing, subscription services, merchandise sales, exclusive content membership programs, licensing content (such as photographs or music), user-generated projects, and crowdfunding.

The bill proposed to impose a 15% withholding tax (WHT) on income earned from digital content monetisation. However, the national assembly adjusted that value downwards to 1.5%. This means that from July 1, any time a content creator receives payment for their work, the payer will be required to withhold 1.5% of the payment and remit it to the government. The idea behind the new law is to include digital content businesses within the scope of taxation, given their significant growth in recent times.

One possible way that creators will attempt to retain their earnings is by adjusting their rate cards to their business partners, but will it be done?

READ MORE: Taxing creativity: Kenyan content creators pushback against proposed taxes

Crypto traders have not been spared

The bill suggested implementing a digital asset tax (DAT) that must be paid on earnings obtained from the transfer or trade of digital assets. According to the bill’s definition, a digital asset is anything valuable without physical presence, such as crypto, NFTs, or other digital representations. These assets are generated through cryptographic methods or alternative means and serve as a digital representation of value that can be electronically transferred, stored, or exchanged.

Based on the law, platform owners will deduct Digital Asset Tax (DAT) at 3% from the value of the digital asset being transferred or exchanged. In the case of non-resident platform owners, they will remit the tax within 24 hours after making the deduction.

A few notes can be made from the law. First, making a deduction within 24 hours of trading is a short period that will not excite many crypto traders. Secondly, the law says it will tax turnover other than gains, effectively meaning that some crypto traders may eventually stop trading altogether as it will not be lucrative anymore.

Expensive digital loans

Kenya has only licensed 32 loan apps after the Central Bank of Kenya (CBK) directed to have them freshly registered. Kenyans tend to prefer digital loans because they are offered without collateral. However, lenders use other forms of guarantees, such as personal data, which they tend to abuse. For this reason, they were asked to stop their operations and register their businesses afresh after meeting some requirements.

The new law has widened the definition of ‘fees’ to encompass any charges associated with lending activities conducted by digital lenders. This expansion entails all costs linked to such transactions within the scope of excisable duty. The outcome of the law is that the cost of borrowing from digital apps (such as Branch and Tala) will increase.

All these changes will come into effect from July 1, 2023. 

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