For instance, the amendment if signed into law by President Uhuru Kenyatta will see an investor selling a property worth Sh150 million having gained Sh50 million in five years pay Sh7.5 million in Capital Gains Tax (CGT) compared to the current rate of Sh2.5 million.
Similarly, an investor selling shares at the Nairobi Securities Exchange (NSE) will have to part with three times in Capital Gains Tax, a move likely to slow activities at the bourse which dropped to a 20-year low on Friday.
Other portfolios to be affected by the MPs change of law include amounts received in return for the abandonment, forfeiture, or surrender of the property and money received for the use or exploitation of the property i.e rent.
Others are compensation received for damage, injury to the property, or for the loss of the property and insurance policy reimbursement in respect of injury, or loss or damage to the property.
Yesterday, industry experts criticised the move, saying it will dampen investment in the country.
Financial analyst and securities trader Alykhan Satchu termed the move as retrogressive saying, that investors will now find it hard to get any profit at the Nairobi bourse.
"I think Kenya was well served by a low tax environment. Those were halcyon days. We have entered a period where tax policy-making is knee-jerk and without much consideration to outcomes,'' Satchu said in an emailed response.
Jairus Chahasi, an investor with shares in almost all 25- top counters at NSE termed the proposal as a huge blow.
''Why should I give the government three times in taxes? Why apply a sin tax on investments? It is high time the government criminalises investment,'' Chahasi told the Star on phone.
Jeniffer Musyimi, Quantity Surveyors of Kenya vice president was of a similar opinion
''It will affect the property sales and transfers such that it reduces the income realisable by a person selling or transferring a property,'' Musyimi said.
She added that the law is likely to reduce the sales of property as people start reevaluating the net gains.
Kenya Association of Manufacturers (KAM) chairman Mucai Kunyiha had earlier warned that tripling the rate three times will kill the real estate sector.
“Tripling that rate from five to 15 per cent is killing the real estate sector. That will make an investment in our country more unpredictable, we will mess up our ease of doing business index and slow the growth of the economy.”
Dynamo Property chief Stanely Matu has also condemned the proposal, terming it as a double tragedy to the property market.
''The Covi-19 tragedy shoved us into oblivion. We expect the government to come up with a more friendly tax regime to boost the industry which is in a market correction,'' Matu said.
In addition to the increased tax rates, the property sellers will still be exposed to high tax charges after the legislators refused to allow the introduction of inflation adjustment (indexation) on the buying price of the property when calculating the CGT.
Indexation involves adjusting the base (original) buying price of a taxable property upwards for tax purposes to mitigate the inflationary distortion.
The tax was reintroduced in 2014 after being suspended in 1985. It was shot down on the ground that it will “complicate the process” of calculating the rate.
Yesterday, NSE said it is engaging various stakeholders including the National Treasury with the view of retaining it at five percent in order to support recovering sectors.
''Like all other sectors, real estate experienced a decline on the onset of Covid-19. We hope the government will consider our proposal as the real estate sector recovers from the pandemic effects,'' NSE boss Geoffrey Odundo told the Star.
