Highlights of the debate in Parliament which were passed relating to CGT are as follows:
- Comes into effect on 1 January 2015
- Taxes capital gains made by companies on the disposal of any property (which is widely defined)
- Taxes gains made by individuals on (a) land and (b) marketable securities including investment shares (latter being shares listed on the Nairobi Stock Exchange). There are some exemptions such as residential houses that have been owner occupied for the last three years.
- No CGT on assets being transmitted under the terms of a will/inheritance.
- Rate is 5% of the gain. There is an anomaly in relation to investment shares sold by individuals where the rate of 7.5% in the Eighth Schedule appears to have been overlooked.
- There is NO indexation by reference to the date of acquisition. Part III of the Eighth Schedule which had a reduction formula for acquisitions prior to 1975 has been deleted. There will be all sorts of problems establishing adjusted cost in order to establish the gain. The principle will be actual acquisition cost plus cost spent on developing or preserving the property.
- Parliamentarians appear to have repealed the provisions which dealt with the deduction of withholding tax on transfers which are subject to capital gains. How do they propose to collect the tax on non-resident sales of shares (for instance)? There is another anomaly here as the withholding tax provisions in the Eighth Schedule (imposing on stockbrokers a requirement to deduct) remain in place. This only applies to the transfer of listed shares by individuals.
- Bill awaits Presidential assent.