Property Sellers Will Now Have To Pay Double Tax

For a very long time, the Kenyan government has been getting 5% as the capital gain every time a property owner sells a piece of land. However, in the new budget statement (2019/2020 budget) presented Henry Rotich who is now the Treasury Cabinet Secretary proposes that the capital gain has doubled up to 12.5% and it will be implemented next month.

What does this mean to the people selling ta land?
There will be a reduced income to those selling the land, intangible, and securities assets.
Mr. Rotich added that to harmonize the rate with other jurisdictions, ensure there is fairness and to enhance equity, the government will need to review the Capital Gains Tax (CGT) legislation after four years of implementation.
He added that in the East Africa Community, the CGT ranges from 20% to 30%, which means that the steep rise is still below the regional average. Nevertheless, he offered official pardon to companies moving from one location to restructure their businesses. He exempted such entities from this tax to allow a smooth restructuring.
In his statement, he mentioned that this measure would allow corporate entities to restructure their operations for market efficiency and efficiency.
On the KRA website, the current information available shows that the exemptions available are offered on property transfer between spouses as a part of divorce statement or property disposal meant for administering the estate of a deceased person.
In addition, another exemption is the sale of agricultural property in an area less than 100 acres, and the property is situated outside an urban or a municipality area.
The previous 5% CGT was introduced four years ago, and the government hopes that the latest move will help them accumulate higher tax revenue to help finance the 3.02 trillion budget.
He concluded by stating that the whole purpose of this implementation is to enhance revenue and increase the tax base.
Conclusion
The properties targeted by this tax include;
  • Marketable securities
  • Buildings
  • Land
Let's have a quick look at some countries within the East African Region

  • In Tanzania, their tax capital gains are at the rate of 10% for locals and 20% for the foreigners.
  • In Uganda, their CGT is at 30%, although the rates vary from 25% to 45% for mining firms based on the profits the mine gets.
  • Burundi charges 15%
  • Rwanda introduced a CGT of 5% through the Income Tax Act (2018).

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