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Kenya Publishes Capital Gains Tax Guide

by Lorys Charalambous,, Cyprus

30 December 2014

The Kenyan Revenue Authority (KRA) has released guidelines for the five percent capital gains tax (CGT) that will be reintroduced next year on the sale of property, including land, buildings and marketable securities.

CGT was eliminated in Kenya in 1985 in an effort to attract investments in mining, real estate, and the stock exchange. However, given that there is not considered to be a need for such an incentive at present, its re-imposition is being seen as broadening the country's tax base to provide additional revenue.

CGT is to be charged on gains accruing to an individual or a company on or after January 1, 2015, on the transfer of property, regardless of whether the property was purchased before that date. As a transaction based tax, it should be paid not later than the 20th day of the month following that in which the transfer was made.

The taxpayer is to calculate, by self-assessment, the gain upon which tax is to be computed, but those computations are subject to KRA's confirmation of the correct gain. A loss may be carried forward to be offset/deducted against a capital gain at a future date.

On payment of the tax, the requirements include a CGT form completed by the seller; a copy of the sale/transfer agreement of the property; proof of the incidental costs related to the acquisition and transfer of the property; a copy of the title deed or ownership document for the property; and a report from a registered valuer in the case of property transactions between related parties.

Certain transactions are exempted, such as the sale of land by an individual where the proceeds are less than KES30,000 (USD331); the disposal of property for purpose of administering the estate of a deceased person; the vesting of property in the hands of a liquidator or receiver; the transfer of an individual residence occupied by the transferor for at least three years before the transfer; and compensation by the Government for property acquired for infrastructure development.

Special treatment is also afforded to the net gain on the disposal of a taxpayer's interest in immovable property in the mining and petroleum industry. The applicable rate of tax is 30 percent for residents and 37.5 percent for non-residents with permanent establishments. Immovable property in this case means "a mining right, an interest in a petroleum agreement, mining information or petroleum information."

TAGS: individuals | capital gains tax (CGT) | compliance | tax | business | tax compliance | mining | interest | real-estate | oil and gas | tax authority | tax rates | Kenya

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