After an abeyance that lasted close to 30 years, the government reintroduced the Capital Gains Tax (CGT) with effect from 1st January, 2015.
CGT is a tax levied on the gains resulting from the transfer of properties through sale from one party to another within Kenya.
According to the Eighth Schedule to the Income Tax Act, properties include land, buildings, securities and intangible assets.
Kenya’s CGT rate is arguably the lowest not only in the region but also in the continent at large. While some jurisdictions charge CGT at highs of 20, 30 or even 40 percent, in Kenya the transferor is only required to pay to the taxman five percent of the net gain resulting from such transfers.
However, not all transfers attract CGT. Key exemptions include transfer of property to a spouse, transfer of a property worth less than three million shillings; transfer of securities listed or traded in the Nairobi Securities Exchange as well as machinery and motor vehicles, among others.
Kenya Revenue Authority’s (KRA) website elucidates more on this. Despite a vicious flak from a section of the stakeholders opposed to CGT, reintroduction of the regime was a laudable move towards bridging the gap between the taxpaying population and the actual population.
Just like in most countries, only a sizeable portion of the Kenyan population contributes to the very national coffers the government draws from to provide crucial amenities to the entire country.
The sizeable taxpaying population consists of individual taxpayers and corporate bodies.
Someone once opined that the government does not have a farm of its own from where it can get resources to support the nation. Its only source of income is what the taxpayers pay.
When CGT was in suspension, without any doubt, the government lost considerable revenue from transfer of assets and securities that change hand on a daily basis.
Its reinstatement was therefore not only an avenue for expanding the country’s tax base but also a platform for everyone to contribute to the government.
Kenya being one of the countries that have embraced self-assessment tax framework, patriotic citizens of this country need to come out and pay what is due to the government, be it CGT or any other tax payable by the people.
This should be done without necessarily having to wait to be followed by the taxman.
If we diligently do this, government borrowing shall only exist in history books to be read by our future generations in school.
David Kirui, Thika, via email.