The Capital Gains Tax Kenya 2026 framework has undergone several important amendments under the Finance Act 2026. These changes will significantly influence how investors, businesses, and multinational groups structure property transactions, corporate reorganizations, and investment vehicles. The amendments expand Kenya’s taxing rights while simultaneously introducing targeted exemptions designed to promote investment.

A Clearer Definition of Immovable Property

One of the notable amendments under Capital Gains Tax Kenya 2026 is the replacement of the word “and” with “or” in the definition of immovable property. Although seemingly minor, this drafting change is significant as it clarifies that land-related interests and mining or petroleum interests are independent categories of immovable property rather than cumulative requirements.

This clarification is expected to reduce interpretational disputes and provide greater certainty when applying provisions that rely on the definition of immovable property, particularly those relating to Capital Gains Tax.

New Capital Gains Tax Exemptions Promote Investment and Estate Planning

The Finance Act 2026 introduces two welcome Capital Gains Tax exemptions.

First, benefits arising due to death are now expressly exempt from tax, providing certainty for beneficiaries and reducing the financial burden on estates during succession.

Secondly, capital gains arising from the transfer of property to a Real Estate Investment Trust (REIT) registered by the Commissioner under Section 20(1) are exempt from CGT. This measure is expected to encourage the use of REIT structures by allowing property owners and developers to transfer qualifying assets into regulated investment vehicles without triggering an immediate CGT liability.

Taxpayers intending to rely on this exemption should ensure that the receiving REIT is duly registered and that the transfer satisfies all the statutory requirements.

Expanded Scope of Capital Gains Tax for Non-Residents

One of the most significant developments under Capital Gains Tax Kenya 2026 is the expansion of Kenya’s taxing rights over indirect transfers involving Kenyan assets.

The Finance Act now brings into the scope of CGT gains realized by non-residents from the disposal of shares that derive value from Kenya. It also captures transactions that result in changes in the ownership or group membership of Kenyan resident companies or changes in ownership, title, or interests in property situated in Kenya.

This represents a substantial shift in Kenya’s taxation of offshore restructurings and indirect share transfers. Consequently, multinational groups and foreign investors should evaluate Kenyan CGT implications before undertaking share disposals, mergers, acquisitions, or internal group reorganizations involving Kenyan subsidiaries.

Capital Gains Tax Structuring Considerations

While the Capital Gains Tax Kenya 2026 amendments strengthen Kenya’s ability to tax gains connected to Kenyan assets, they also create areas of uncertainty.

Unlike other provisions that contain a 20% threshold based on value or capital, the new rule applies where shares merely derive value from Kenya without defining the level of value required. Consequently, even where a Kenyan subsidiary represents only a small fraction of the value of an offshore group, the transaction may potentially fall within the Kenyan CGT net.

In addition, the legislation does not prescribe a formula for determining the portion of the gain attributable to Kenya. This creates uncertainty for taxpayers undertaking cross-border transactions and increases the possibility of disputes with the tax authority.

Potential Double Taxation

The absence of an allocation mechanism also raises the risk of double taxation under the Capital Gains Tax Kenya 2026 framework. An offshore share disposal could potentially be taxed both in Kenya and in another jurisdiction, particularly where the Kenyan assets constitute only a minor component of the overall transaction value.

Until further guidance is issued, taxpayers should carefully assess the Kenyan tax implications of international restructurings and consider whether relief may be available under an applicable Double Tax Agreement (DTA) or through foreign tax credit mechanisms.

What Capital Gains Tax Kenya 2026 Means for Investors and Businesses

The changes introduced under the Finance Act 2026 have important implications for investors, businesses, property owners, and multinational groups involved in transactions connected to Kenya.

Businesses and investors should consider the Capital Gains Tax implications early when planning:

• Property transfers and disposals;
• Share disposals involving Kenyan companies;
• Cross-border transactions;
• Mergers and acquisitions;
• Internal group reorganizations;
• Offshore restructurings; and
• Transfers of qualifying property to REITs.

Early consideration of CGT can help taxpayers identify potential tax exposure, assess available exemptions and reliefs, and reduce the risk of unexpected tax liabilities or disputes.

Conclusion

The Capital Gains Tax Kenya 2026 amendments reflect Kenya’s continued efforts to align its Capital Gains Tax regime with international tax developments by expanding the taxation of indirect transfers while encouraging investment through targeted exemptions such as those applicable to REITs and death-related benefits.

Given the broader scope of the legislation and the uncertainties surrounding the taxation of indirect disposals, businesses and investors should incorporate CGT considerations early in transaction planning. Obtaining appropriate tax advice before implementing restructurings, property transfers, or offshore share disposals will be essential to manage tax risks, ensure compliance, and optimize transaction structures.

As Kenya’s tax framework continues to evolve, understanding the Capital Gains Tax Kenya 2026 changes will be increasingly important for businesses and investors seeking to structure transactions efficiently while remaining compliant with their tax obligations.

Frequently Asked Questions About Capital Gains Tax Kenya 2026

What is Capital Gains Tax in Kenya?

Capital Gains Tax (CGT) is a tax imposed on gains arising from the transfer of taxable property in Kenya. The Capital Gains Tax Kenya 2026 framework includes provisions affecting property transactions, share disposals and certain indirect transfers involving Kenyan assets.

What are the key Capital Gains Tax changes under the Finance Act 2026?

The Finance Act 2026 introduces several changes to Kenya’s CGT framework, including amendments to the definition of immovable property, new exemptions relating to death benefits and qualifying REIT transfers, and an expanded scope affecting certain transactions involving non-residents.

Are transfers to REITs exempt from Capital Gains Tax in Kenya?

Yes. Capital gains arising from the transfer of property to a Real Estate Investment Trust (REIT) registered by the Commissioner under Section 20(1) are exempt from CGT, subject to the applicable statutory requirements.

Does Capital Gains Tax apply to non-residents in Kenya?

Yes. The Capital Gains Tax Kenya 2026 framework expands Kenya’s taxing rights over certain transactions involving non-residents, including specified indirect transfers and transactions connected to Kenyan assets.

How does Capital Gains Tax affect offshore share transfers?

Offshore share transfers may have Kenyan CGT implications where the transaction involves shares that derive value from Kenya or results in changes affecting Kenyan resident companies or property situated in Kenya. Multinational groups should therefore assess the Kenyan tax implications before completing offshore disposals or reorganisations.

What is the Capital Gains Tax rate in Kenya?

The applicable Capital Gains Tax rate in Kenya is 15% of the net gain, subject to the applicable provisions, exemptions and circumstances of the transaction.

Can Capital Gains Tax result in double taxation?

Yes. Cross-border transactions may create potential double taxation where the same gain is taxable in Kenya and another jurisdiction. Taxpayers should consider whether relief may be available under an applicable Double Tax Agreement (DTA) or through foreign tax credit mechanisms.

What should businesses consider before undertaking a transaction?

Businesses and investors should assess the CGT implications early in the transaction-planning process. This is particularly important for property transfers, share disposals, mergers and acquisitions, offshore restructurings and internal group reorganisations. Obtaining appropriate tax advice can help identify potential liabilities, exemptions and available reliefs before a transaction is implemented.

WRITTEN BY Dancan Orina