Capital Gains Tax in Kenya

The Capital Gain Tax (CGT) was introduced in Kenya effective 1st January 2015. It is levied on gains made from transfer of property situated in Kenya, whether or not the property was acquired before 1st January 2015. The Income Tax Act, Cap 470, which provides for the charging of CGT, provides for what is deemed as ‘property.’ For an Individual, property means;

1. land situated in Kenya and any interest or right in or over that land; and

2. a marketable security situated in Kenya, other than an Investment share as defined in Part II of the 8th Schedule. The part defines an Investment share as shares of companies, municipal or Government authorities or a body created by those authorities, that are listed and traded on the Nairobi Stock Exchange;

Transfer of property occurs where property is sold, exchanged, conveyed, or otherwise disposed of in any manner whatever (including by way of gift), whether or not for consideration. The Finance Act, 2022 amended the Income Tax Act to increase the rate for CGT from 5% to 15%.

CGT is payable by the seller (or person transferring the property) on the earlier of registration of the transfer instrument in favor of the transferee or the payment of the full purchase price by the vendor. Since the tax is reliant on the location of the property, both resident and non-resident persons are required to remit CGT when they transfer property.

The Finance Act 2023 introduced new perspective to CGT by providing that CGT shall be charged where a property is transferred in a transaction that is not subject to capital gains tax, and the property is subsequently transferred in a taxable transaction within a period of less than 5 years. The adjusted cost in the subsequent transfer will be based on the original adjusted cost in the first transfer. This is expected to increase the CGT collections for the taxman.

Notably, issuance of companies own share and debentures is exempted from CGT.

Please note that this is not legal advice and is intended primarily for information purposes. If you require tailored advice or further information, please contact us at sarinke@mckayadvocates.com.