Kenya Capital Gains Tax on Land and Property: What Sellers Need to Know in 2025

If you are selling land or property in Kenya, Capital Gains Tax (CGT) is a mandatory part of the transaction. Many sellers still treat it as optional or easy to skip. It is neither.

This article explains how CGT works, who pays it, how to calculate it correctly, which transactions are exempt, and what the Kenya Revenue Authority (KRA) can do if you fail to file.

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What Is Capital Gains Tax?

Capital Gains Tax is a tax on the profit you make when you sell or transfer a capital asset. In Kenya, land and buildings are capital assets for CGT purposes.

CGT was reintroduced in Kenya in January 2015 after being suspended since 1985. The Finance Act 2023 increased the rate from 5% to 15%, but the Finance Act 2023 increase was challenged and partially reversed. As of 2025, the rate applicable to most property transactions is 5% of the net gain.

The net gain is the difference between the transfer value (what you sell for) and the adjusted cost basis (what you originally paid, adjusted for improvements).

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Who Pays CGT?

The liability falls on the transferor, meaning the seller or the person giving up ownership.

This applies to individuals, companies, partnerships, and any other legal entity that sells or transfers land or buildings in Kenya. Residency does not matter. If the asset is in Kenya, KRA has jurisdiction over the gain.

The buyer in a transaction is not directly liable for CGT. However, the completion of a transfer at the land registry is linked to KRA's CGT payment confirmation, which means an unpaid CGT obligation by the seller can block the buyer from registering the transfer.

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How to Calculate CGT

The formula is straightforward:

Net Gain = Transfer Value minus Adjusted Cost Basis

CGT Payable = 5% x Net Gain

Transfer value is the price paid by the buyer, or the market value of the property at the date of transfer if no money changes hands (for example, gifts).

Adjusted cost basis is made up of:

The original purchase price of the property.

The cost of any capital improvements you have made to the property (extensions, development, infrastructure). Running maintenance costs do not count.

Any incidental costs of acquisition, such as stamp duty, legal fees paid when you bought the property, and survey fees.

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A Practical Example

You bought a plot in Kiambu in 2015 for KES 3,000,000. You spent KES 800,000 building a perimeter wall and access road. You paid KES 120,000 in legal fees and stamp duty at acquisition.

Your adjusted cost basis is: 3,000,000 + 800,000 + 120,000 = KES 3,920,000.

You sell the plot in 2025 for KES 9,500,000.

Net gain: 9,500,000 minus 3,920,000 = KES 5,580,000.

CGT payable: 5% x 5,580,000 = KES 279,000.

Without the improvement and acquisition cost deductions, the gain would have been calculated at KES 6,500,000, producing a higher and incorrect tax figure. Keeping receipts for all capital expenditure is therefore financially material.

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Exempt Transactions

Not all transfers trigger CGT. The main exemptions under the Income Tax Act (Kenya) are:

Principal private residence exemption. If the property is your main home and you have lived in it as your main residence, the gain on sale is exempt. The exemption applies to the house and up to one acre of land. If the land sold is larger than one acre, the excess portion is taxable.

Spousal transfers. A transfer of property between spouses is exempt from CGT where the transfer is by way of gift and the parties are married at the time of transfer.

Charitable transfers. A transfer to an approved charitable organisation is exempt.

Transfers to wholly-owned subsidiaries. In certain corporate restructuring scenarios, a transfer between a parent company and a wholly-owned subsidiary may qualify for exemption, subject to conditions.

Transfers on death. The transmission of property through a deceased person's estate is not a sale for CGT purposes. CGT would apply if and when the beneficiary later sells.

If you believe your transaction qualifies for an exemption, document the basis carefully. KRA may query any transaction that shows a large gain but no CGT payment.

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The KRA Filing Process

CGT is filed and paid through the KRA iTax portal (itax.kra.go.ke).

The filing deadlines are strict. CGT must be filed and paid within 30 days of the date of transfer or the date of the sale agreement, whichever is earlier.

The process requires:

Registration on iTax as a taxpayer (if not already registered).

Filing of a CGT return (Form CGT-1) with the transfer value, cost basis, and gain calculation.

Payment of the assessed tax before KRA issues a CGT payment confirmation.

Presentation of the KRA payment confirmation to the land registry as part of the transfer documentation.

The land registry will not process a transfer without the CGT clearance. This makes the CGT payment a practical prerequisite for completing a sale, not just a legal obligation.

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What Happens If You Do Not Pay

Failure to file and pay CGT on time triggers:

A late payment penalty of 5% of the unpaid tax per month, capped at 20% of the unpaid amount.

Interest on the unpaid amount at 1% per month until paid.

KRA has the power to issue a demand and, in serious cases, to refer the matter for prosecution.

Beyond the penalties, the practical consequence is that your buyer cannot register the transfer. In a competitive property market, a seller who creates a CGT blockage at completion risks losing the buyer entirely.

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What Sellers Should Do Before Signing

Before you sign a sale agreement, calculate your likely CGT liability. Gather all receipts for capital improvements and acquisition costs. Confirm whether any exemption applies.

If CGT is material to your net proceeds, factor it into your asking price. A seller who treats CGT as an afterthought and then nets less than expected at completion is a transaction risk for everyone involved.

Your advocate is required to advise you on CGT as part of the conveyancing. If they have not raised it, ask.

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Verify the Title Before You List

A clean, verifiable title makes a property much easier to sell. Disputes, encumbrances, and registry inconsistencies discovered late in a transaction can collapse a sale and trigger CGT complications if a signed agreement is already in place.

A Litmus verification confirms the title's clean status, identifies any registered encumbrances or cautions, and provides a signed, dated report suitable for inclusion in the transaction file.

A Litmus standard report is KES 21,500. A field verification, including physical inspection of the parcel, is KES 25,500. Both include a Section 106B certificate.

Ordering verification before you list saves time, prevents last-minute surprises, and gives buyers the confidence to proceed.

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This article is for general information only and does not constitute tax or legal advice. CGT rules can change with each Finance Act. Consult a certified tax adviser or Kenya advocate before completing a property transaction.