A seller agrees on a price, the buyer’s advocate sends the completion checklist, and one line reads: capital gains tax. Many sellers meet the tax for the first time at the point of sale, when the timetable allows little room for surprises. Understanding what the tax covers, and when it falls due, helps sellers plan the net proceeds with accuracy and keeps registration on schedule.
What is capital gains tax on property?
Capital gains tax is charged on the gain a transferor makes on the transfer of property situated in Kenya, including land and buildings. The taxable gain is the difference between the transfer price and the cost of acquiring and improving the property, together with the incidental expenditure the rules allow. The charge arises under the Income Tax Act, whose legislation and the administrative guidance published around it can be consulted through Kenya Law. The tax is distinct from stamp duty, which the buyer bears on the transfer instrument.
Who pays, and when?
The tax is the liability of the transferor, so it falls on the seller. Payment is made to the Kenya Revenue Authority before the transfer is registered, and the registries require evidence of payment when the instrument of transfer is lodged. Sellers who leave the computation until completion week often find the payment holding up registration, which is why the obligation belongs on the completion timetable from the day the sale agreement is signed.
What records should sellers gather?
- The original purchase documents showing the acquisition cost of the property.
- Invoices and records supporting capital improvements made over the years.
- Incidental costs of the current sale that the rules permit to be deducted.
- Any exemption claimed, together with the evidence supporting it.
Valuation questions, statutory exemptions and the treatment of inherited or gifted property each add detail to the computation, and the Kenya Revenue Authority publishes current guidance and filing procedures on its website. The firm advises sellers on the tax steps within its Nairobi conveyancing practice, and the firm’s practice areas set out the wider transactional services available to landowners.
For guidance on your specific situation, contact CS Advocates LLP , call, WhatsApp, or book a confidential consultation at our Westlands, Nairobi office.