What sellers need to know
Selling a property in Kenya sets off two separate obligations: agreeing on a price with a buyer, and settling what the taxman is owed on the difference between that price and what the property cost you. The second obligation is Capital Gains Tax, and it is due before the transfer can even be registered. A seller who has not planned for it can find the sale stalled at the finish line.
What Capital Gains Tax actually taxes
Capital Gains Tax, or CGT, is charged on the profit made when property, land or unquoted shares change hands in Kenya, and it is administered under the framework that the Kenya Revenue Authority sets out for CGT. It is a tax on the gain, not on the sale price; if a property is sold at a loss, no CGT arises. The seller, referred to as the transferor, carries the obligation to declare and pay it, not the buyer.
The current rate
CGT in Kenya is charged at 15% of the net gain on a property transfer. It is a final tax, meaning once it is paid, that gain is not taxed again elsewhere. The net gain is the transfer value, less incidental costs of the transfer, less the adjusted cost of the property, being acquisition cost, incidental acquisition costs, and any enhancement or improvement costs.
A worked example
Take a seller who bought a plot in 2019 and is transferring it now. The numbers below show how the net gain and the tax on it are actually arrived at.
|
Item |
Amount |
|
Sale price |
KES 12,000,000 |
|
Acquisition cost (2019 purchase price) |
KES 7,500,000 |
|
Incidental costs (legal fees, valuation, agent commission on purchase and sale) |
KES 850,000 |
|
Net gain |
KES 3,650,000 |
|
Capital Gains Tax at 15% |
KES 547,500 |
What counts as a deductible cost
The gain is calculated after allowable expenses are subtracted, so keeping records of these from the day of purchase pays off at the point of sale:
When a sale is exempt
Not every transfer attracts CGT. The exemption sellers ask about most often is the private residence exemption: a property is exempt if the owner has occupied it continuously for the three years immediately before the transfer. Other exemptions cover transfers between spouses, transfers to immediate family, transfers as part of a divorce settlement, and transfers by a personal representative to a beneficiary in the course of administering a deceased person’s estate.
How and when it gets paid
CGT is declared and paid through iTax, and it falls due at whichever comes first: the seller receiving the full purchase price, or the transfer instrument being registered in the buyer’s favour. In practice, this means the tax is settled as part of closing, not afterward, and a completed transfer is not registered until it is.
Why this matters before a sale is priced
Sellers who treat CGT as a closing-day formality often discover the acquisition cost and improvement record they need are incomplete. Establishing the adjusted cost base early and confirming whether an exemption applies changes what a sale actually nets, and it changes it before an asking price is set rather than after an offer is accepted.
