How Crypto Trading Profits Are Taxed in Kenya

Kenya no longer has a tax aimed specifically at crypto trading. The 3% digital asset tax was repealed in 2025, and the Income Tax Act no longer even uses the term “digital asset”. That has led some traders to assume their profits are now tax-free. They are not. Crypto profits fall back under the ordinary income tax rules, and those rules treat an active trader, a long-term individual holder and a company very differently. This article explains how, based on the Income Tax Act as in force from 1 July 2026.

What the repeal changed

The Finance Act 2023 inserted section 12F into the Income Tax Act, charging 3% on the value of every transfer or exchange of a digital asset. Section 8 of the Finance Act 2025 repealed section 12F, and section 30(e) of the same Act deleted the 3% rate from the Third Schedule, both with effect from 1 July 2025. The replacement, a 10% excise duty on the fees virtual asset service providers charge, is a tax on platforms, not on traders’ profits. We cover it, and the Finance Act 2026 reporting rules, in our article on Kenya’s digital asset tax after the Finance Bill 2026.

The repealed tax was a withholding tax on turnover, collected by the platform. With it gone, nothing is deducted at the point of trade, and declaring tax on profits is left to the trader.

Active traders: business income

Section 3(2)(a)(i) of the Income Tax Act charges tax on gains or profits from any business, for whatever period it is carried on. Section 2 defines “business” to include any trade and “every manufacture, adventure and concern in the nature of trade”. A person can be trading without a registered business or an office.

The Act does not set out a test for when buying and selling crypto becomes a business. In practice, KRA and the courts look at the facts, including:

• how often the person trades and in what volumes;
• how long assets are held before being sold;
• whether the activity is organised, for example with bots, leverage or borrowed money;
• whether the person’s purpose at the time of buying was to resell at a profit; and
• whether trading is a main source of the person’s income.

Someone who trades daily, uses leverage and lives off the results will find it hard to argue they are not carrying on a business. Their net profit for the year is added to their other income and taxed at the individual rates in the Third Schedule, which rise from 10% to 35% on income above KES 9.6 million a year. Platform fees and other costs of earning the profit are deductible in the usual way.

Individual holders: outside capital gains tax

An individual who buys bitcoin and holds it for years is in a different position. If that is investment rather than trade, the gain on sale would normally be a capital gain. Section 3(2)(f) charges capital gains tax, at 15% under paragraph 14 of Head B of the Third Schedule, on gains computed under the Eighth Schedule.

The Eighth Schedule, however, defines “property” narrowly for individuals. In the case of an individual, it means only land situated in Kenya (and rights over it) and a marketable security situated in Kenya, other than an investment share. A cryptocurrency is neither. On the current text, an individual’s gain on disposing of crypto held as an investment is not within capital gains tax at all.

Two cautions apply. First, this only helps a genuine investor; if the activity amounts to trading, the gain is business income and fully taxable. Second, a token that is in substance a security issued in Kenya could fall within “marketable security”, which the Schedule defines to include a security capable of being sold.

Companies: capital gains tax applies

The position for companies is different. For a company, the Eighth Schedule gives “property” the broad meaning in the Interpretation and General Provisions Act, and expressly includes property acquired or held for investment. A Kenyan company that holds crypto as an investment and sells it at a gain should expect capital gains tax at 15%. A company that trades crypto as part of its business pays corporate income tax on the profit instead. Companies building a treasury in crypto should decide, and document, which treatment applies before they dispose of anything.

Derivatives, offshore platforms and losses

Derivatives. Section 3(2)(i) separately charges “gains from financial derivatives”, excluding those traded on the Nairobi Securities Exchange. Section 2 defines a financial derivative as an instrument whose value is linked to another instrument and which “is to be settled at a future date”. A perpetual future has no settlement date, so whether it fits that definition is open to argument. For most active perpetuals traders the point is academic, because the profits are business income anyway. We discuss the regulatory side in our article on crypto perpetual futures in Kenya.

Offshore platforms. Section 3(1) charges income that accrued in or was derived from Kenya. Section 4(a) adds that where a resident carries on a business partly within and partly outside Kenya, the whole of the profit is deemed to be derived from Kenya. A Kenyan resident trading from Nairobi on an exchange based abroad cannot rely on the platform’s location to keep the profit out of Kenyan tax.

Losses. Section 15(7) requires income from each specified source to be computed separately. A trading loss can only be set against profits from the same source, carried forward to later years where needed; it cannot be set against employment income or rent. Capital gains and capital losses are kept outside that system altogether.

Records and reporting

Section 23 of the Tax Procedures Act requires every person to keep the records needed to work out their tax liability for five years from the end of the period they relate to. For a crypto trader, that means exchange statements, wallet addresses, transaction histories and the shilling value of each trade at the time it was made. Platform histories can disappear when an account is closed or a platform fails, so traders should download and keep their own copies.

The information gap is also closing. Since 1 July 2026, section 6C of the Tax Procedures Act has required virtual asset service providers to file annual information returns on reportable users, and section 6D allows Kenya to exchange that information with other countries. Traders should assume KRA will increasingly see what they trade.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.