Introduction to Capital Gains Tax

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Capital Gains Tax (CGT)
We shall focus on Capital Gains Tax definition, rate, calculation
and CGT types.

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What is Capital Gains Tax (CGT)?
• CGT is tax levied on transfer of property situated in Kenya, which was acquired on
or before January 2015.

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Who pays for CGT?
It is declared and paid by the person who makes the transfer of the property.

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Rate of Tax for CGT
• The rate of tax is 5% of the net gain arising from sale of property. This is a final tax,
meaning, the Capital Gain is not subject to further taxation after payment of the 5%
rate of tax.

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Net gain explained;
Net Gain is Sales Proceeds minus the Acquisition and Incidental cost. It is the excess of
the transfer value over the adjusted cost of the property that has been
transferred.

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What is Transfer Value?
Transfer value is the amount/value of consideration or compensation for property
transferred less incidental costs.

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What is Adjusted Cost?
Adjusted cost includes;
• the cost of acquisition/construction
• expenditure on enhancement of value/preservation of the property

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Adjusted Cost cont’
• cost of defending title/right over property
• incidental costs of acquiring the property

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Calculation/Example;
Sales Proceeds = Ksh. 2,000,000
Acquisition cost = Ksh. 1,000,000
Incidental cost = Ksh. 100,000

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Calculation/Example cont’
Net gain = Ksh. 2,000,000 – (Ksh. 1,000,000 + Ksh. 100,000) = Ksh. 900,000
Therefore; CGT is Ksh. 900,000 * 5% = Ksh. 45,000

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Capital Gain Types
The different CGT types include;
• CGT1– This involves transfer of land and buildings by individuals & corporate bodies

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Capital Gain Types cont’
• CGT1P–Transfer of land and buildings by partnerships
• CGT2–Transfer of marketable securities by individuals &corporate bodies

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Capital Gain Types cont’
• CGT2P–Involves transfer of marketable securities by partnerships
• CGT3–Involves declaration for transactions that are exempt from CGT

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The End