Investors and homeowners who are seeking to dispose off their properties will be subjected to more levy charges starting January next year.
This follows the signing into law of The Finance Act 2022 that will see those in the real estate sector pay 15 per cent of their profits to the government.
The law, signed by President Uhuru Kenyatta in June, officially operationalised the Capital Gain Tax (CGT). The Capital Gain tax is a levy on the profit that an investor makes when an investment is sold. It is owed for the tax year during which the investment is sold. It is declared and paid by the transferor of the property.
Capital Gain is however not subject to further taxation after payment of the newly approved 15 per cent tax. Initially, the Capital Gain Tax stood at five per cent and was introduced to the real estate sector in 2015. The new law will take effect from January 2023.
The raised tax hands the Kenya Revenue Authority a boost in revenue collection but has left property developers at a disadvantage.
KRA however exempts from CGT capital income that is taxed elsewhere as in the case of property dealers, issuance by a company of its own shares and debentures, transfer of property for the purpose only of securing a debt or a loan, and transfer by a creditor for the purpose only of returning property used as security for a debt or a loan. Transfer by a personal representative of any property to a person as beneficiary in the course of the administration of the estate of a deceased person is also exempt.
Others are transfer of assets between spouses, transfer of assets between former spouses as part of a divorce settlement or a bona fide separation agreement, or transfer of assets to immediate family, company where spouses or a spouse and immediate family hold 100 per cent shareholding and private residence. This is if the individual owner has occupied the residence continuously for the three-year period immediately, prior to the transfer concerned.
CGT is due on or before transfer of property but not later than the 20th day after the transfer.
The CGT, which is among other tax measures being implemented, is aimed at rising revenues to fund the Sh3.3 trillion budget for the Financial Year 2022/23.
