Capital Gain Tax (CGT) is a tax levied on gains from the transfer of real estate or properties in Kenya, whether or not it was acquired before January 2015. The tax rate is 5% of the profit and is paid by the seller or seller of the property. It is a final tax and will not be subject to further taxation after payment.
It was introduced in by financial act 2014 on January 1, 2015, after being suspended in 1985 with aims to uphold the principles of justice and justice in the tax system in accordance with the 2010 Kenyan Constitution. That is capital gains and income to expand the tax base.
Items that attract capital gains tax
- Properties that are disposed of, conveyed, exchanged in any manner whether or not for consideration
- In the event of property loss, destruction, or extinction, whether or not compensation is received for the loss, destruction, or extinction unless such funds are used to restore the property. property in essentially the same form and in the same place within one year.
- Upon abandonment, surrender, annulment, or forfeiture of or expiration of substantially all rights to the property, including the relinquishment of shares or deed when the company is dissolved.
- The gains received from the transfer of property by an insurance company other than property connected to the life insurance business.
What is transfer value?
The transfer value is: Amount of or value of the consideration for the transfer of the property, Sums received in return for the abandonment, forfeiture, or surrender of the property, Sums received as consideration for the use of exploitation of the property, Sums received by way of compensation for damage or injury to the property or for the loss of the property or Sums received under a policy of insurance in respect of injury, or loss or damage to the property.
Method of computing capital gains
They are several methods of computing capital gains tax namely
Net gain- is the excess of the transfer value over the adjusted cost of the property that has been transferred
Transfer value – its the amount of consideration for property transferred less incidental costs
Adjusted cost- is the cost of acquisition or construction, expenditure for enhancement of value or preservation of the property; cost of defending title/right over property, and the incidental costs of acquiring the property
CGT on Non-residents
Non-resident income is assessed and taxed on behalf of the person or on behalf of the trustee, guardian, curator, committee, or lawyer, factor, and agent
Properties Exempted and Excluded From Capital Gain Tax
- Income that is taxed elsewhere e.g property dealers;
- Issuance of shares/debentures of The Company
- Transfer of machinery including motor vehicles;
- Transfer of property to a liquidator
- Individual residence occupied at least three years immediately before the transfer;
- Sale of land by an individual where the proceeds are less than Kshs. 3 Million Exemptions and Exclusions
- Agricultural land that is less than 50 acres;
- Exchange of property during reorganization by companies approved by Treasury to be in the public interest;
- Transfer of securities by a body expressly exempted under the Income Tax Act.
- Transfer of securities by retirement benefits scheme registered with Commissioner
- Transfer of securities traded at national security exchange.
- Property transfer for securing a loan
- Transfer of an asset between spouses or former spouses or their immediate family or to a company where spouses or a spouse and immediate family hold 100% shareholding.
- Property transferred for the purpose of administering the estate of a deceased person: within two years of the death of the deceased.
