If you’re selling land, a house, or even company shares in Kenya, there’s a tax you can’t afford to ignore: Capital Gains Tax (CGT). It’s charged on the profit you make when selling an asset, whether it’s property, shares, or business goodwill. Since its reintroduction in 2015 and recent enforcement enhancements by the Kenya Revenue Authority (KRA), CGT has become a critical part of tax compliance for investors, companies, and ordinary Kenyans alike.
This article breaks down CGT in simple terms—what it is, how it works, exemptions, the calculation formula, and what you need to do to avoid penalties.
Table of Contents
- What Does Capital Gains Tax Apply To?
- Who Pays Capital Gains Tax?
- How Much Is Capital Gains Tax?
- How to Calculate Capital Gains Tax
- Exemptions from Capital Gains Tax
- How and When to Pay Capital Gains Tax
- Common Mistakes in CGT Compliance
- Legal and Tax Compliance Checklist
- FAQs on Capital Gains Tax in Kenya
- Staying Compliant with CGT
What Does Capital Gains Tax Apply To?
Capital Gains Tax in Kenya is primarily governed by the Income Tax Act. It applies to gains from the sale or transfer of property. This includes:
- Land or buildings (urban or rural)
- Shares in private or public companies
- Intellectual property rights
- Business goodwill
- Mineral rights and similar interests
Examples of CGT-Applicable Transactions
- Selling a plot of land in Kiambu at a profit
- Transferring shares of a family business
- Gifting land to someone (non-exempt transfers)
Who Pays Capital Gains Tax?
The seller (transferor) of the asset is responsible for declaring and paying CGT.
This includes:
- Individuals (residents and non-residents)
- Companies (local and foreign, with Kenyan assets)
- Trusts and estates
Even non-resident companies must account for CGT if they dispose of Kenyan property or shares in Kenyan companies.
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How Much Is Capital Gains Tax?
As of 1st January 2023, CGT is charged at a flat rate of 15% on the net gain.
This means:
Capital Gain × 15% = CGT Payable
CGT is a final tax—you don’t add this gain to your other income for further taxation.
How to Calculate Capital Gains Tax
Capital Gain = Selling Price – (Cost of Acquisition + Incidental Costs)
What Counts as Incidental Costs?
- Legal fees (e.g. advocate fees)
- Stamp duty and valuation fees
- Advertising costs related to sale
- Commissions paid to agents
- Survey and title search expenses
Example:
You bought land in 2010 at KSh 2,000,000. You sell it in 2024 for KSh 5,000,000.
You incurred KSh 300,000 in legal and agency costs.
Net Gain = 5,000,000 – (2,000,000 + 300,000) = 2,700,000
CGT Payable = 2,700,000 × 15% = KSh 405,000
Exemptions from Capital Gains Tax
Not all transfers attract CGT. The following are exempt under the First Schedule of the Income Tax Act:
- Transfers of property to immediate family (spouses, children, parents)
- Land for agricultural use not exceeding 50 acres outside a municipality
- Transfers by way of inheritance or gift between family members
- Transfers of private residences if owner has lived there for at least 3 years
- Transfers under a will or succession law
- Company restructuring or amalgamations, under certain conditions
- Licensed unit trusts, REITs, and venture capital companies
Note: You must apply for exemption through iTax and get KRA’s confirmation.
How and When to Pay Capital Gains Tax
1. Declaration
You must file the CGT return via your KRA iTax account. It’s separate from the annual income tax return.
2. Timeline
CGT must be paid within 30 days of transferring the property.
3. Payment Mode
Through your KRA iTax portal using the CGT Payment Registration Number (PRN), followed by bank or M-Pesa payment.
4. Clearance
You’ll need the CGT Acknowledgement Receipt to complete any land or share transfer with the Lands Registry or CMA.
Common Mistakes in CGT Compliance
| Common Mistakes | What to Do Instead |
|---|---|
| Failing to calculate CGT | Engage a tax advisor early |
| Paying late | Pay within 30 days of transfer |
| Ignoring family gifts or sales | Confirm exemption eligibility |
| Underreporting incidental costs | Keep all sale-related receipts |
| Relying solely on real estate agents | Advocate or tax expert should guide |
Legal and Tax Compliance Checklist
☐ Determine whether the asset attracts CGT
☐ Calculate the net gain using proper documents
☐ Check for any available exemptions
☐ File a CGT return on iTax within 30 days of the sale
☐ Pay CGT and get an acknowledgement receipt
☐ Present the CGT acknowledgement receipt or compliance certificate during registration of transfer
FAQs on Capital Gains Tax in Kenya
Is CGT applicable to the sale of shares?
Yes. If you sell shares at a profit—especially in private companies—you must pay CGT.
Can CGT be deferred or spread out?
No. It’s payable in full within 30 days after the transfer.
Can I offset a capital loss with a capital gain?
No. Capital losses are not deductible under Kenya’s tax laws.
Do I need to file CGT even if there was no gain?
Yes. You still need to file the return and indicate that there was no gain.
Can I file CGT manually?
No. All CGT returns must be filed online via KRA’s iTax system.
Staying Compliant with CGT
Capital Gains Tax is no longer a dormant provision—it is actively enforced by the KRA. Whether you’re disposing of land, shares, or business interests, take CGT seriously. Understanding how it’s calculated, when it’s due, and whether you qualify for exemptions can save you thousands in penalties and legal costs.
If you’re unsure how to go about your transaction, consult a lawyer or tax advisor.
Talk to Us
At Wacu Mureithi & Co. Advocates, we help individuals and businesses navigate capital gains tax issues with clarity and confidence. Whether you’re transferring land, selling shares, or restructuring your company, our legal team is here to ensure compliance and protect your interests.
Contact us for a consultation on CGT and related property or tax matters.