What Is Your Gain? Capital Gains Tax on Property Transactions in Kenya

12 Pages Posted: 22 Aug 2015 Last revised: 3 Sep 2015

Date Written: September 1, 2015

Abstract

1st January 2015. Kenya re-introduced Capital Gains Tax which had been suspended in 1985 so as to encourage growth in the real estate and capital markets sectors. However, after budgetary constraints due to among others ambitious development projects and a growing wage bill, there was need for the Kenyan Government to broaden the tax net. The Capital Gains Tax was viewed as a low hanging fruit considering it would have been inequitable to further tax the incomes of already overtaxed populace while still shielding capital gains from tax. This paper interrogates the background of Capital Gains Tax in Kenya, the legal framework and further analysis the challenges of its implementation in property transactions. The argument is, reintroduction of Capital Gains Tax is welcome for it helps in ensuring taxation equity. It is noted that as part of law reform process, there is need to streamline Capital Gains Tax legal framework to harmonize it with the realities such as inflation and currency depreciation. This would in turn make the collection more effective and reduce negative ripple effects on key sectors of the economy such as the securities market.

Keywords: Capital Gains Tax; Eighth Schedule; transfer of Property; exempt transaction; the Finance Bill 2015; investment shares; indexation; tapering relief

JEL Classification: K34

Suggested Citation

Gatuyu, Justice, What Is Your Gain? Capital Gains Tax on Property Transactions in Kenya (September 1, 2015). Available at SSRN: https://ssrn.com/abstract=2648284 or http://dx.doi.org/10.2139/ssrn.2648284

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