Capital gains tax when selling property or shares
The capital gains tax rate in Kenya's Income Tax Act, why some KRA pages still show another rate, when the tax is due and which records to keep.
By Achekam · · 5 min read · For Running a business businesses in Kenya
Selling a plot, a building or a block of shares is often the largest single transaction a Kenyan business owner makes in a year. The price gets all the attention during the negotiation. The tax on the gain tends to come up late, usually when a lawyer asks for proof of payment before the transfer can go ahead.
Two things make capital gains tax in Kenya more confusing than it needs to be. Different official pages quote different rates, and the deadline is tied to a document being lodged rather than to a month-end. This article sorts out both, and lists the records that make the computation straightforward.
The rate the law sets
At the time of writing, the Income Tax Act sets capital gains tax at fifteen per cent, and it is a final tax. The rate sits in the Third Schedule, Head B, paragraph 14 of the Act as published on Kenya Law. The same paragraph provides a five per cent rate for certain investments that carry a certificate from the Nairobi International Financial Centre Authority, which will not apply to most sellers.
"Final tax" means the capital gains tax paid on the gain settles the tax on that gain. It is not added to your other income and taxed again at your normal rate.
You can read the rate for yourself in the Income Tax Act on Kenya Law, where the Third Schedule sets out the rates of tax, including the capital gains rate.
Why some KRA pages show a different rate
If you search KRA's website you may find five per cent rather than fifteen. KRA's page on filing and paying taxes for companies and partnerships still shows the older figure. The rate in the current Income Tax Act governs, so plan on fifteen per cent unless your investment falls within the narrow exception above for investments with a Nairobi International Financial Centre certificate, and confirm with KRA or your tax adviser before you sign.
The practical lesson: when two official sources disagree on a rate, the Act is the one to follow, and the date on the page you are reading matters.
When the tax is due
KRA says capital gains tax is due and payable on or before the date the transfer documents for the property are lodged at the lands office. In other words, the tax comes before the transfer, not after it. A buyer's advocate will usually want to see that it has been paid before lodging.
That wording is about property. If you are selling shares, ask KRA or your adviser how the due date applies to your particular transfer, and do not assume the property rule fits. Our article on transferring shares in a Kenyan company covers the company side of a share sale.
Stamp duty alongside
A property or share transfer usually carries stamp duty as well, and its deadline runs separately. KRA says stamp duty on documents prepared in Kenya must be paid within 30 days, and on documents prepared abroad within 30 days of receiving them. It warns that unpaid stamp duty makes the transaction invalid and inadmissible as evidence in court.
So a seller may be dealing with two taxes on one transaction: capital gains tax before the documents are lodged, and stamp duty within its own window. Whether the buyer or the seller bears the stamp duty depends on the agreement, so read it. For the stamp duty timing in more detail, see stamp duty deadlines in Kenya.
Disposals in Achekam's books
There are two separate jobs when a business sells an asset: the accounting entry and the tax computation.
The accounting entry. Achekam's fixed-asset register lets a business add assets at cost, depreciate them each month by straight line or reducing balance, and dispose of them with the profit or loss posted to the ledger. When you sell a building or equipment, recording the disposal there posts the accounting profit or loss on the sale. Note that the register does not work out tax wear-and-tear, so the accounting figure and the tax figure will usually differ.
The tax computation. Once its rules have been approved, Achekam computes Kenyan capital gains tax and stamp duty, alongside corporation tax, instalment tax, VAT, withholding tax and turnover tax. Achekam starts its Kenyan capital gains tax rule on 1 January 2023, a date the research found. Most other Kenyan rules start on 1 January 2026 in Achekam, and earlier periods are refused rather than guessed. If your sale or your records reach back further, see tax periods before 2026.
Records to keep for the computation
The gain is only as reliable as the paperwork behind it. Before you sign a sale agreement, gather:
- Proof of what you paid. The original sale agreement, transfer documents and payment records from when you acquired the asset.
- Costs of buying. Legal fees, stamp duty and other costs you paid at acquisition.
- Spending on the asset. Invoices for improvements and additions, kept separately from ordinary repairs.
- The sale documents. The new sale agreement, the agreed price and the costs of selling, such as agents' and legal fees.
- Payment evidence. The payment slip and receipt for the capital gains tax, and the stamp duty payment, kept with the transfer file.
- Your fixed-asset register entry. The cost, the depreciation to date and the disposal posting, so the accounts and the tax file tell the same story.
Ask your tax adviser which of these costs count in the computation for your transaction. The point of gathering them early is that missing paperwork is far harder to find once a buyer is waiting to lodge the transfer.
Before you agree a price
Work out the capital gains tax at fifteen per cent of the expected gain before you agree a price, so the after-tax proceeds are what you expect. Then put the deadline in your diary against the lodging date, not the completion date, and agree in writing who is paying the stamp duty.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
