Capital Gains Tax on Property Sales in Kenya

What sellers need to know

 Selling a property in Kenya sets off two separate obligations: agreeing on a price with a buyer, and settling what the taxman is owed on the difference between that price and what the property cost you. The second obligation is Capital Gains Tax, and it is due before the transfer can even be registered. A seller who has not planned for it can find the sale stalled at the finish line.

 What Capital Gains Tax actually taxes

Capital Gains Tax, or CGT, is charged on the profit made when property, land or unquoted shares change hands in Kenya, and it is administered under the framework that the Kenya Revenue Authority sets out for CGT. It is a tax on the gain, not on the sale price; if a property is sold at a loss, no CGT arises. The seller, referred to as the transferor, carries the obligation to declare and pay it, not the buyer.

The current rate

CGT in Kenya is charged at 15% of the net gain on a property transfer. It is a final tax, meaning once it is paid, that gain is not taxed again elsewhere. The net gain is the transfer value, less incidental costs of the transfer, less the adjusted cost of the property, being acquisition cost, incidental acquisition costs, and any enhancement or improvement costs.

 A worked example

Take a seller who bought a plot in 2019 and is transferring it now. The numbers below show how the net gain and the tax on it are actually arrived at.

 

Item	Amount
Sale price	KES 12,000,000
Acquisition cost (2019 purchase price)	KES 7,500,000
Incidental costs (legal fees, valuation, agent commission on purchase and sale)	KES 850,000
Net gain	KES 3,650,000
Capital Gains Tax at 15%	KES 547,500

 

What counts as a deductible cost

The gain is calculated after allowable expenses are subtracted, so keeping records of these from the day of purchase pays off at the point of sale:

• The original acquisition or construction of the property
• Loan or mortgage interest tied to acquiring the property
• Legal fees on both the purchase and the sale
• Valuation costs
• Costs of advertising the property to find a buyer
• The cost of enhancements or improvements made to the property

When a sale is exempt

Not every transfer attracts CGT. The exemption sellers ask about most often is the private residence exemption: a property is exempt if the owner has occupied it continuously for the three years immediately before the transfer. Other exemptions cover transfers between spouses, transfers to immediate family, transfers as part of a divorce settlement, and transfers by a personal representative to a beneficiary in the course of administering a deceased person’s estate.

How and when it gets paid

CGT is declared and paid through iTax, and it falls due at whichever comes first: the seller receiving the full purchase price, or the transfer instrument being registered in the buyer’s favour. In practice, this means the tax is settled as part of closing, not afterward, and a completed transfer is not registered until it is.

Why this matters before a sale is priced

Sellers who treat CGT as a closing-day formality often discover the acquisition cost and improvement record they need are incomplete. Establishing the adjusted cost base early and confirming whether an exemption applies changes what a sale actually nets, and it changes it before an asking price is set rather than after an offer is accepted.