The government will more than double capital gains tax resulting from gains through sale of property to 12.5 percent from the current five percent.
The Budget statement presented by Treasury Cabinet Secretary Henry Rotich on Thursday proposes the increase set to be implemented next month. This will lead to reduced income by people selling land, buildings, securities and intangible assets.
“After four years of implementation there is need to review the Capital Gains Tax (CGT) legislation to enhance equity and fairness as well as harmonise the rate with other jurisdictions,” said Mr Rotich.
If approved by Parliament, it will see property transferrers pay Kenya Revenue Authority (KRA) 12.5 per cent of the net gain resulting from such transfers.
Mr Rotich said the CGT in the East Africa Community ranges from 20 per cent to 30 per cent, meaning the steep rise is still below the regional average.
However, he offered reprieve to companies moving from one location to another for the purpose of restructuring their businesses.
Such entities, he proposed, will be exempted from this tax to allow for seamless restructuring.
“This measure will allow corporate entities to restructure their operations for efficiency and market penetration,” he said.
Information available on KRA website shows that currently, exemptions are also offered on disposal of property meant for administering the estate of a deceased person or transfer of property between spouses as part of divorce settlement.
In addition, sale of agricultural property having an area of less than 100 acres where property is situated outside a municipality or urban area is exempt.
The five per cent CGT was introduced four years ago and the government hopes that the latest move will result in higher tax revenues to help in financing the Sh3.02 trillion budget.
The tax was supposed to help widen the tax base.
The CS said the increasing demand to mobilise resources calls for need to further expand the tax base and enhance revenue.