Human rights advocates want Parliament to reject the Treasury’s proposal to exempt capital gains tax—charged at 15 percent on net gains—on transfers of property to real estate investment trusts (REITs).
REITs are pooled funds investing in property development or ownership, allowing investors partial ownership in the form of units (shares), which they can trade.
The Kenya Human Rights Commission (KHRC) told the National Assembly’s Finance and National Planning Committee that the proposed exemption of capital gains tax on transfer of property to REITs raises significant concerns relating to revenue protection, tax equity, and avoidance risks within the tax framework.
The Treasury has proposed in the Finance Bill 2026 to exempt from capital gains tax any capital gains realised on the transfer of property to a REIT that is registered with the Kenya Revenue Authority.
The Bill also proposes to exempt from stamp duty any instrument that transfers a beneficial interest in property to a REIT authorised under the Capital Markets Act. The Treasury is proposing to amend the First Schedule to the Income Tax Act, which provides for categories of income that are exempt from income tax.
“REITs already benefit from substantial tax advantages under existing law, including exemptions from income tax at entry level, deemed tax-paid treatment on investor distributions, and value-added tax exemption on asset transfers into REITs,” John Kottowa from the KHRC said.
“The proposed amendment would therefore create an almost complete tax-free structure for high-value property transactions conducted through REITs, allowing substantial gains to escape capital gains tax, income tax, and VAT simultaneously.”
He told the committee, chaired by Molo MP Kuria Kimani, that the proposals also create a substantial risk of structured tax avoidance through the use of REITs as temporary conduits for property sales to eliminate otherwise payable capital gains tax liabilities.
While making submissions during the public participation exercise on the Finance Bill, 2026 organised for Nairobi County residents, Mr Kottowa said the proposed blanket exemption is disproportionate and risks undermining the principles of progressive taxation and equitable revenue collection.
The Treasury’s proposal, if enacted into law, will further expand tax incentives for Reits which are seen as a means of allowing small investors to access the capital-intensive real estate sector.
Most commercial properties are owned by rich individuals and institutions such as pension funds and investment firms.
REITS are exempt from the 30 percent income tax that normal companies pay. This means that shareholders (unitholders) only pay withholding tax –at five percent for residents— on the distributions they receive from the investment vehicles. Subsidiaries that are fully owned by a REIT are also exempt from income tax.
