Income derived from transfer of property is subject to income tax pursuant to the provisions of the Income Tax Act Cap 470 Laws of Kenya (“the ITA”). Where the property is deemed to have been acquired and held for investment purposes, the gain arising from selling the said property is treated as a capital gain and is subject to CGT pursuant to section 3(2)(f) of the ITA. 

CGT was reintroduced in Kenya by way of amendments to the Eighth Schedule to the ITA and is chargeable at the rate of 15% on the excess of the property’s transfer value over its adjusted cost. Adjusted cost consists of the following: 

1. cost of acquisition of the property;  
2. expenditure incurred at acquisition to either enhance or preserve the value of the property at the time of transfer;  
3. expenditure incurred after acquisition in establishing, preserving or defending the title to or right over the property; and  
4. the incidental costs to the transferor of the property. 

A ‘transfer’ is defined in the ITA as: