Kenya’s Digital Asset Tax After the Finance Bill 2026: What Crypto Businesses and Investors Now Owe

Kenya has taxed digital assets in three different ways in three years, and much of the commentary crypto businesses rely on still describes an outdated version. The digital asset tax introduced by the Finance Act 2023 was repealed by the Finance Act 2025 and replaced by a 10% excise duty on a much narrower base. The Finance Act 2026 has now added reporting and information-exchange rules on top. None of this is the same question as licensing under the Virtual Asset Service Providers Act 2025, and a business can be fully licensed and still get its tax treatment wrong.

The 3% digital asset tax and its repeal

The Finance Act 2023 inserted section 12F into the Income Tax Act, creating a digital asset tax payable on income derived from the transfer or exchange of digital assets. The Act defined “digital asset” to include cryptocurrencies, tokens and non-fungible tokens. It defined the taxable amount as the gross fair market value of the consideration received or receivable at the point of exchange or transfer. Paragraph 13 of the Third Schedule set the rate at three per cent of the transfer or exchange value.

Section 12F made the owner of a platform, or the person who facilitates the exchange or transfer, responsible for deducting the tax and remitting it to the Commissioner within five working days. A non-resident platform owner had to register under the simplified tax regime. The tax applied to the full value of the trade, whether or not the trade was profitable.

The commencement dates matter. Section 1 of the Finance Act 2023 brought section 10, which inserted section 12F, and section 26(b)(xiii), which set the rate, into operation on 1 September 2023, not 1 July 2023 as is sometimes stated.

Section 8 of the Finance Act 2025 repealed section 12F. Under section 1 of that Act, all sections other than sections 14 and 62 took effect on 1 July 2025, so the repeal operated from that date.

The 10% excise duty on platform fees

The Finance Act 2025 also amended the schedule to the Excise Duty Act by adding a new paragraph: excise duty on fees charged on virtual asset transactions by virtual asset providers is ten per cent of the excisable value. The shift in base matters more than the headline rate. The old tax was 3% of the value moving through the trade, while the new duty is 10% of the fee the provider charges for handling it.

A simple example shows the difference. On a KES 100,000 trade where a platform charges a 1% fee (KES 1,000), the excise duty is KES 100. The repealed digital asset tax would have been KES 3,000 on the same trade. Anyone still budgeting for a 3% charge on trade value is working from a repealed provision.

The Finance Act 2026 reporting regime

The Finance Act 2026 (Act No. 19 of 2026) was assented to on 23 June 2026. It did not change the excise duty rate or reintroduce a value-based tax. Instead, section 39 inserts new sections 6C and 6D into the Tax Procedures Act. Under section 1 of the Finance Act 2026, all sections other than sections 17, 18, 24 and 43 took effect on 1 July 2026, so the reporting rules have applied since that date.

Section 6C requires each virtual asset service provider to file an information return with the Commissioner for every calendar year, covering the virtual asset users with which it has a relationship and who are identified as reportable users or as having reportable controlling persons. The obligation applies where the provider offers a service that effects exchange transactions or makes a trading platform available on behalf of a customer, including acting as counterparty or intermediary. A provider with no reportable users must still file a nil return. The Act gives “virtual asset” and “virtual asset service provider” the meaning in section 2 of the Virtual Asset Service Providers Act, 2025.

The penalties are separate from any tax liability:

• a false statement in an information return is an offence carrying a fine of KES 100,000 for each false statement, or imprisonment of up to three years, or both;
• omitting required information attracts a penalty of KES 100,000 for each omission;
• failing to file a return, including a nil return, attracts a penalty of KES 1,000,000 for each failure; and
• a person is not liable for the false statement or omission penalties where the information concerns another person and a reasonable effort was made to obtain it from that person.

Section 6D allows Kenya to enter into agreements with other countries for the automatic exchange of information on virtual asset transactions. Information exchanged must comply with the Data Protection Act and be limited to what is necessary and proportionate. The Commissioner may not exchange information unless satisfied that the receiving jurisdiction has adequate safeguards, and must keep a record of disclosures.

Income tax still applies

Repealing the digital asset tax removed a transaction tax. It did not turn the profits of a trader into tax-free income. Section 3(2)(a)(i) of the Income Tax Act charges gains or profits from any business, for whatever period carried on. Whether a particular trader or token issuer is carrying on a business depends on the facts, so frequent, organised trading needs a closer look than an occasional disposal. This is assessed on the trader’s own profit, separately from the excise duty on platform fees.

Licensing is a separate question

The Virtual Asset Service Providers Act, 2025 (Act No. 20 of 2025) was assented to on 15 October 2025 and commenced on 4 November 2025. Section 5 makes the Capital Markets Authority and the Central Bank of Kenya the relevant regulatory authorities, together with any other public body the Cabinet Secretary designates, and section 6 gives them the function of licensing virtual asset service providers. Section 47 requires anyone already providing virtual asset services to comply within one year of commencement, which points to about 4 November 2026.

The Virtual Asset Service Providers Regulations, 2026 (Legal Notice 134 of 2026) were published on 22 July 2026 and commenced the same day. A business can be correctly licensed and still be exposed on the tax side if it has not registered for excise duty or built a section 6C reporting workflow. Sorting out tax registration does not replace the licensing deadline.