Kenyan real estate taxes

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Taxes On real Estate in Kenya

Capital Gain Tax

Real Estate is a very vibrant industry in Kenya. Owning or trading in Real estate is universally regarded as the true measure of success. But just as any other trade it is affected by market factors.

As such, the real estate industry is subject to several taxes. In the next month let us get to know the taxes that one is subject to in real estate trade in Kenya.

Most taxes in real estate are paid during the transaction or transfer of real estate. One of the taxes is Capital Gains Tax (CGT). This is a tax that is levied on transfer of property situated in Kenya. Properties acquired on or before January 2015 are subject to this tax.

The rate of tax is 5% of the gain and is paid by the seller or the transferor of the property.

Amount to be taxed= (Transfer value – Cost incurred to sell the property)

(Acquisition cost + cost inquired to improve the property)

There are three CGT types.

CGT 1 is meant for land and buildings,

CGT 2 is for shares

CGT 3 is for the exemptions which are all listed on itax.

Property may be transferred from one party to another through different ways such as gifting, inheritance, selling It is important to note that not all cases of transfer of property attract payment of CGT.

The exempt situations include; income that is taxed elsewhere, sale of land by individual where the proceeds is less than 3 million, marketable securities, disposal of property for purpose of administering the estate of a deceased person and transfer of property between spouses as part of divorce settlement. Other exempt situations are, vesting property to a liquidator or receiver, transfer of machinery including motor vehicles, just to mention but a few.

When computing CGT, three terms are used. One is the net transfer value which is the transfer value less incidental expenses to the transfer. The second term is the adjusted cost of the property which is the cost of acquisition, expenditure for enhancement of preservation of the property; cost of defending title over property and incidental costs of acquiring property.

The third term is Capital Gain or Loss which is Net transfer value less the adjusted cost of the property. When these details are captured in system during the payment process, then the amount payable will be 5% of the gain made.


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