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Deals surge lifts capital gains tax to record Sh14bn
Data by the Treasury shows that collections from the Capital Gains Tax (CGT) rose by 20.6 percent to Sh11.05 billion in the half-year to December 2024.
Taxes collected from financial deals, including sale of land, houses, and shares in privately held firms, jumped by 28.5 percent to a record Sh14.2 billion for the half-year to December 2025, extending a run of growth for two consecutive years after an initial slump triggered by the tripling of the rate in 2023.
Data by the Treasury shows that collections from the Capital Gains Tax (CGT) rose by 20.6 percent to Sh11.05 billion in the half-year to December 2024.
The back-to-back expansion in CGT collections marks a firm rebound from the 16.5 percent contraction recorded in the half-year of the financial year 2023/24, when collections fell to Sh9.16 billion following the surge in the tax rate.
The dip came in the wake of the government raising the CGT to 15 percent from five percent in January 2023, despite opposition from business associations and professional bodies that warned of disruption to property and investment markets.
CGT is the levy investors pay on the profits, or gains, made when they sell, give away, or dispose of an asset, such as shares or property like homes.
The tax is paid on the gain investors make after excluding costs associated with the property, such as upgrades, legal fees, and mortgage interests, and not the value of the asset itself.
The decline in the first year of the CGT enforcement reflected a pause in deal-making after investors sought to seal deals before the higher rate took full effect, while others delayed disposals and restructured transactions.
Timing of the CGT payments ahead of the higher rate, which was enforced in January 2023, resulted in legal battles between the Kenya Revenue Authority (KRA) and investors.
The taxman has since 2023 pursued a series of cases against companies and high-net-worth individuals it accuses of underpaying CGT by applying the previous five percent rate to transactions it argues should have been taxed at 15 percent. The dispute revolved around whether the CGT should be charged when a deal is signed or when full payment is made.
The KRA says the tax becomes payable upon completion of payment, a stance that has allowed it to target deals initiated in 2022 but concluded in 2023, when the higher rate was in force.
This interpretation drew pushback from several prominent businessmen. Firms linked to industrialist Paul Kinuthia, textile billionaire Jaswinder Bedi, politician Peter Kenneth, and lawyer Ambrose Rachier are among those contesting claims that they underpaid CGT by using the earlier rate.
Other disputes involve Nairobi businessman Amos Gichuki Ngonjo and shareholders in pharmaceuticals distributor Harleys, which was sold for Sh3.69 billion to a subsidiary of Mauritian conglomerate IBL Group.
The Treasury data shows CGT collections started rebounding by 2024/25, suggesting that markets had begun to reprice assets and incorporate the new tax rate. The continued climb in receipts into 2025/26 indicates normalisation, with activity not only recovering but surpassing pre-hike levels.
Taxable gains from asset transactions are not adjusted for inflation, meaning investors are taxed on nominal gains that may partly reflect rising prices rather than real profit. Calls by tax experts and business groups to introduce indexation—adjusting the purchase price of assets for inflation—have repeatedly been rejected because it would complicate administration.
When CGT was reintroduced in 2015 after a 30-year suspension, the government opted for a low five percent rate, arguing it was simple and sufficiently accounted for inflation. The jump to 15 percent renewed concerns that the tax may overstate real gains, particularly in periods of high inflation.
