KRA Can Now Tax All Deposits . Here’s Why Crypto Users Should Care
Monday mornings aren’t neat. Incase you’re having a beautiful morning, let me remind you that on 2 September 2025, a Tax Appeals Tribunal judgment went live confirming that if you can’t prove where your deposits came from, KRA can treat them as taxable income.
What This Means in Plain English
Any deposit can be taxed if unexplained, whether from a chama payout, an M-Pesa transfer, or a crypto cash-out.
The burden of proof is on you, not KRA. Under Section 56 of the Tax Procedures Act, once KRA issues a decision, you must show it’s wrong, with supporting documents.
Mobile money isn’t invisible. In fact, the case itself included M-Pesa transfers that were treated as income when the taxpayer couldn’t produce evidence to the contrary.
For everyday Kenyans, this is a heavy shift. Few people keep formal paperwork for small mobile-money flows or informal family support. Yet the evidentiary bar has been raised sharply.
Privacy Red Flags
This isn’t just about tax.
Kenya’s policy direction this year has included giving KRA broader visibility into private financial data, with proposals to access more transaction-level records.
Pair that with a Tribunal ruling that “unproven deposits = income” and you get a reality where ordinary transfers are suspicious by default.
Is KRA Being Greedy?
Kenya already has one of Africa’s most aggressive tax regimes. This ruling shifts the weight from large-scale evaders to ordinary citizens who may simply lack paperwork.
In practice, this could push more Kenyans into cash-based or underground systems—ironically making transactions harder to track.
Implications for Crypto & DeFi
Fiat off-ramps are now risky without proof. When you withdraw to M-Pesa or a bank, you’ll need documentation—trade histories, capital records, loan agreements, or gift letters.
On-chain doesn’t shield you. DeFi may be pseudonymous, but once you touch fiat, the trail resumes and KRA can follow it.
The risk of over-taxation is real. Without crypto-specific tax rules, a blanket “deposit = income” stance could penalize honest traders and builders who move capital, reimbursements, or transfers.
How to Stay Safe (Legally)
1. Document everything. Save exchange statements, wallet CSVs, screenshots, and agreements for loans, gifts, or capital.
2. Keep accounts separate. Don’t mix chama money, business funds, and crypto cash-outs in the same account.
3. Use platforms with paper trails. Choose venues that issue statements you can download.
4. Label your inflows in real time. Keep a simple log or memo for each deposit—reconstructing later is difficult.
5. Leverage blockchain transparency. On-chain records can prove provenance when paired with exchange KYC documents.
6. Stay ahead of compliance. Kenya is moving toward tighter tax and AML reporting, not looser. Be ready.
Final Take
Like a coat of old paint, financial privacy in Kenya is peeling everyday against our will. Compliance-friendly design is now a competitive edge.
DeFi, financial freedom, will prevail. There’s always a way.
Here at Blockwisely, we’ll keep tracking how policies like this reshape the intersection of crypto, DeFi, and everyday finance in Kenya.
Is this an opportunity for DeFi startups? How will you be mitigating this? Let me know what you think.
