Capital Gains Tax Kenya

Capital Gains Tax (CGT) in Kenya has undergone significant reforms in recent years. Reintroduced in 2015 at a rate of 5%, CGT applies to gains from the sale of immovable property or shares located in Kenya. The Finance Act 2022 increased this rate to 15%, effective January 1, 2023, sparking a wave of disputes around timing and tax liability.

Earlier Tax Point Rules and Legal Challenges

Initially, the tax point for CGT was tied to the date when the transfer application was lodged at the Lands Office. This was successfully challenged in Law Society of Kenya vs Kenya Revenue Authority & Attorney General (2017), where the High Court declared that provision unconstitutional.

Finance Act 2023: Redefining the CGT Due Date

Effective July 1, 2023, the Finance Act 2023 provided much-needed clarity by redefining the CGT due date as the earlier of:

• The date the vendor receives the full purchase price, or
• The date the application for transfer is lodged or the title registered.

This amendment sought to eliminate ambiguity but also created fresh disputes—particularly around the transition between the 5% and 15% CGT rates.

Disputes Over Timing: 5% vs 15%

A recurring dispute arose where property or share sales were completed before December 31, 2022 (while CGT was still 5%) but stamping occurred in 2023 (after the rate increased to 15%).

In one case, the Tax Appeals Tribunal sided with the Kenya Revenue Authority (KRA), ruling that the stamping date was the tax point. This interpretation meant taxpayers were hit with the higher 15% rate, even if they had executed and paid for the transaction earlier.

High Court Ruling: Stamping Delays Don’t Shift CGT Tax Point

On July 31, 2025, in Haria v Commissioner of Domestic Taxes (Income Tax Appeal E171 of 2024) [2025] KEHC 115, the High Court overturned the Tribunal’s decision.

The Court ruled that the relevant CGT tax point was December 30, 2022, when both transfer and payment were completed. The subsequent stamping in 2023—delayed by administrative processes—could not be used to retroactively increase the tax burden.

Quoting the judgment:

“The subsequent administrative act of stamping the document, delayed by a third party awaiting a new regime of the law attracting a heavier burden, did not alter the date of the actual transfer for tax purposes and should never have been visited upon the taxpayer to his detriment.”

The Court therefore set aside the KRA’s assessment, siding with the taxpayer.

Why This Ruling Matters

This ruling is a landmark decision for Capital Gains Tax in Kenya, clarifying that:

• Administrative delays such as late stamping by the Lands Registry cannot shift the CGT tax point.
• Taxpayers cannot be penalized by third-party delays when the transaction was completed under a lower rate.
• It strengthens grounds for appeals against Tribunal decisions where tax liability is inflated by bureaucratic inefficiencies.

For taxpayers, this precedent provides certainty and protection in navigating CGT compliance during periods of tax rate change.

Written By Sarah Muli

by Ronalds LLP