How much is capital gains tax on land

What is Capital Gains Tax (CGT)?

CGT is tax that is levied on transfer of property situated in Kenya, acquired on or before January 2015.

It is declared and paid by the transferor of the property

Rate of Tax

The rate of tax is 5% of the net gain.
It is a final tax i.e. the Capital Gain is not subject to further taxation after payment of the 5% rate of tax.
Net Gain is Sales Proceeds minus the Acquisition and Incidental cost
CGT is on gains arising from sale of property.

How to Compute Capital Gains Tax

Net Gain = (Transfer value - Incidental Costs on Transfer) - Adjusted Cost ( Acquisition Cost + Incidental Costs on Acquisition + Any enhancement Cost)

What constitutes a transfer?

• If property is sold, exchanged, conveyed or otherwise disposed of in any manner (including by way of gift), whether or not for consideration;
• On the occasion of the loss, destruction or extinction of property whether or not a sum by way of compensation is received in respect of the loss, destruction or extinction unless that sum is utilized to reinstate the property in essentially the same form and in the same place within one year or within a longer period of the time approved by the Commissioner.
• On the abandonment, surrender, cancellation or forfeiture of, or the expiration of substantially all rights to property, including the surrender of shares or debentures on the dissolution of a company

Some allowable expenses for the purposes of CGT include;

1. Loan/Mortgage interest
2. Cost of advertising to find a buyer
3. Costs incurred in valuation of the property
4. Legal fees
5. Costs of enhancements.

How To Determine the Transfer Value/Selling Prices for the purpose of CGT

1. Amount received for transferring the property
2. Sums received in return for the abandonment, forfeiture or surrender of the property.
3. Amount received  for the use of exploitation of the property eg rent
4. Compensation received  for damage , injury to the property or for the loss of the property
5. Insurance policy reimbursement in respect of injury, or loss or damage to the property.

Exemptions on Capital Gains Tax

• Income that is taxed elsewhere as in the case of property dealers
• Issuance by a company of its own shares and debentures
• Transfer of property for the purpose only of securing a debt or a loan
• Transfer by a creditor for the purpose only of returning property used as security for a debt or a loan
• Transfer by a personal representative of any property to a person as beneficiary in the course of the administration of the estate of a deceased person.
• Transfer of assets between spouses;
• Transfer of assets between former spouses as part of a divorce settlement or a bona fide separation agreement;
• Transfer of assets to immediate family;
• To a company where spouses or a spouse and immediate family hold 100% shareholding;
• A private residence if the individual owner has occupied the residence continuously for the three-year period immediately prior to the transfer concerned

How do I pay for Capital Gains Tax?

CGT is due on or before transfer of property but not later than the 20th day after the transfer.

Payment should be initiated online via iTax.

The modes of payment include cash, cheque or RTGS.

After initiating payment, you will receive a payment slip.

Present the payment slip at any KRA appointed bank with the due tax to complete payment.

Note: The payment slip expires within 30 days.

Property and capital gains tax

How CGT affects real estate, including rental properties, land, improvements and your home.

Keeping records for property
Which records to keep for your property so you can work out CGT when you sell it.

Your main residence (home)
Find out if your home is exempt from CGT, and what happens if you rent it out.

Granny flat arrangements and CGT
Find out if your granny flat arrangement is exempt from CGT.

CGT when selling your rental property
How CGT applies to your rental property and what expenses you can include in your costs.

CGT discount for affordable housing
How to get an extra 10% CGT discount by providing affordable rental housing.

Transferring property to family or friends
Check if you need to work out CGT using the market value of your property.

Subdividing and combining land
How to work out CGT when you sell land that you subdivided or amalgamated.

Property improvements and additions
Use the cost thresholds to check if your capital improvements are subject to CGT.

Calculating your CGT
Use the calculator or steps to work out your CGT, including your capital proceeds and cost base.

Clearance certificates and withholding from property sales
How to get a clearance certificate or withhold on properties sold for $750,000 or more.

How CGT affects real estate, including rental properties, land, improvements and your home.

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How are capital gains on property calculated?

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