REINSTATED IN 2015

Capital Gains Tax crucial in expanding state revenue base

CGT is a tax levied on gains from the transfer of properties and marketable securities through the sales within Kenya

In Summary

• Kenya charges only five per cent as CGT on the seller of property. 

• When CGT was in suspension, the government lost considerable revenue. 

The KRA headquarters at the Times Tower
TAX BASE: The KRA headquarters at the Times Tower
Image: FILE

After abeyance that lasted for a while, the government reintroduced the Capital Gains Tax with effect from January 1, 2015.

CGT is a tax levied on the gains resulting from the transfer of properties and marketable securities through the sale from one party to another within Kenya. According to the Eighth Schedule to the Income Tax Act, properties include land, buildings, securities and intangible assets. Kenya’s CGT rate is arguably the lowest in the continent. While some jurisdictions charge CGT at highs of 20, 30 or even 40 per cent, in Kenya the transferer is only required to pay to the taxman five per cent of the net gain resulting from the transfers.

However, not all transfers attract CGT. Key exemptions include the transfer of property to a spouse, transfer of property worth less than Sh3 million, transfer of securities listed or traded in the Nairobi Stock Exchange as well as machinery and motor vehicles, among others. Kenya Revenue Authority’s website elucidates more on this.

 

Despite vicious flak from a section of the stakeholders opposed to CGT, the reintroduction of the regime was a laudable move towards bridging the gap between the taxpaying population and the actual population. Just like in most countries, only a sizeable portion of the Kenyan population contributes to the very national confers the government draws from to provide crucial amenities to the entire country.

The sizeable taxpaying population consists of individual taxpayers and corporate bodies. Someone opined that the government does not have a farm of its own to support the nation. Its only source of income is what the taxpayers pay. When CGT was in suspension, the government no doubt lost considerable revenue.

Thika