KRA directs payment of capital gains tax during transfer of property

The Kenya Revenue Authority (KRA) has reiterated that the application of Capital Gains Tax will continue applying on all Property related transfers.

Following the reintroduction of the Capital Gains Tax (CGT) this year, KRA has now issued a notice, confirming that the tax will be collected concurrently with applicable stamp duty payments on all property transfer transactions.

In a public notice issued by the Commissioner of Domestic Taxes, Ms. Alice Owour, KRA, has directed real estate investors and their agents to ensure the prompt settlement of the Capital Gains Tax when paying for stamp duty.

“Kenya Revenue Authority, wishes to inform the Public that the Finance Act 2014 reintroduced Capital Gains Tax on the transfer of property with effect from 1st January 2015,” Owour said.

And added: “Upon transfer of land or buildings, the tax shall be paid by the transferor into the Capital Gains Tax collection Account No. 100223577 at the Central Bank of Kenya; through the commercial banks.  Payment of Capital Gains Tax shall be made at the same time that payment for stamp duty on such transfer is made.”

She, further explained that, where a transfer date is different from the settlement date then the transfer date will be the tax point in line with International Accounting Standards. Commissioner Owuor said penalties and interest charges will apply in cases of default and in accordance with the provisions of the Income Tax Act, Cap 470.

CGT, is a tax chargeable on the whole of a gain which accrues to a company or an individual on or after 1st January, 2015 on the transfer of property situated in Kenya, whether or not the property was acquired before 1st January, 2015.

The Finance Act 2014 reintroduced the Tax on the transfer of property with effect from 1st January 2015. The rate of tax is 5 percent of the net gain and cannot be offset against other income taxes.

The transferor, is expected to complete the relevant declaration forms upon transfer of any property, compute the gain and pay the tax thereon accordingly. 

According to the CGT regulations, a transfer, takes place where a property is sold, exchanged, conveyed or disposed of in any manner; or on the occasion of loss, destruction or extinction of property whether or not compensation is received; or on the abandonment, surrender, cancellation or forfeiture of, or the expiration of rights to property. The tax, was suspended in 1985 and the government last year re-introduced the tax effective 1st January, 2015.