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The Capital Gains Tax
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a4architect.com
#41 Posted : Tuesday, September 09, 2014 9:00:02 AM
Rank: Veteran

Joined: 1/4/2010
Posts: 1,668
Location: nairobi
@maina, good observation. it could be a frog in hot water type of experiment.
As Iron Sharpens Iron, So one Man Sharpens Another.
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kyt
#42 Posted : Tuesday, September 09, 2014 9:44:26 AM
Rank: Elder

Joined: 11/7/2007
Posts: 2,182
5% is tooo high considering that there is the 4% commission and now the the maintainance fee by brokers, it means for any realistic gain will should target 30% returns in a year. 10% of your gains are taken up by taxes, commision and maintainance, that is not a good business environment for any company to operate in
LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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Mucene
#43 Posted : Tuesday, September 09, 2014 12:17:40 PM
Rank: Member

Joined: 8/4/2012
Posts: 155
Location: Kenya
jawgey wrote:
kazee wrote:
So if i buy land for 1m, use 3m to develop it and sell the property for 8m, do i pay 5% on (8m-1m)=7m or what? Coz the difference is not all profit, 3m was used to develop the empty land.

Tax accountants?


Development of land is a capital expenditure so there's no way KRA will allow that expense.

you will only be able to claim capital allowances when declaring your income. e.g. rental income.

otherwise capital gains will apply to the (8-1)=7m which is the effective gain doesn't matter if there are legal fees, valuation fees et al involved.


This is a tax on gains on capital and not a tax on income. The costs of acquiring, development and maintenance of the capital item will be allowable.

Remember this tax becomes payable only after selling/transfer of the property, how they will deal with capital allowances claimed before sale is another issue.
If you don't want to go to plan B have a good plan A.
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Othelo
#44 Posted : Tuesday, September 09, 2014 12:20:02 PM
Rank: User

Joined: 1/20/2014
Posts: 3,528
They should have targeted property sector kwanza to bring sanity before jumping on to others e.g. liquid assets!
Formal education will make you a living. Self-education will make you a fortune - Jim Rohn.
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Internet
#45 Posted : Wednesday, September 10, 2014 12:10:58 PM
Rank: New-farer

Joined: 12/16/2009
Posts: 33
I have a question on CGT. If I buy a flat and hold it for 2 years, is the gain a capital gain or is it a profit (and taxed at 30%)? How does one determine a gain to be a profit(taxed at 30%) or a capital Gain(taxed at 5%)?
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sparkly
#46 Posted : Wednesday, September 10, 2014 2:09:18 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
Internet wrote:
I have a question on CGT. If I buy a flat and hold it for 2 years, is the gain a capital gain or is it a profit (and taxed at 30%)? How does one determine a gain to be a profit(taxed at 30%) or a capital Gain(taxed at 5%)?


@Internet the principles to determine the tax to pay are referred to as "badges of trade":
1. Intention - if you bought intending to sell then its 30%. If you bought intending to put it up for rental then its CGT. If you bought to live it, pay CGT.
2. Frequency - If you have an habit of buying and selling apartments then its 30%.
3. Financing - If you bought with a loan and the only way to repay the loan is by selling the apartment, then pay 30% tax.
4. Deal or investment - If you bought as a long term investment you pay CGT. if you bought to make a quick deal then pay tax at 30%.

Life is short. Live passionately.
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Internet
#47 Posted : Wednesday, September 10, 2014 3:10:28 PM
Rank: New-farer

Joined: 12/16/2009
Posts: 33
It means i will have to pay 30%. :(
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kiwaru
#48 Posted : Wednesday, September 10, 2014 4:52:47 PM
Rank: Member

Joined: 8/5/2011
Posts: 125
Mucene wrote:
jawgey wrote:
kazee wrote:
So if i buy land for 1m, use 3m to develop it and sell the property for 8m, do i pay 5% on (8m-1m)=7m or what? Coz the difference is not all profit, 3m was used to develop the empty land.

Tax accountants?


Development of land is a capital expenditure so there's no way KRA will allow that expense.

you will only be able to claim capital allowances when declaring your income. e.g. rental income.

otherwise capital gains will apply to the (8-1)=7m which is the effective gain doesn't matter if there are legal fees, valuation fees et al involved.


This is a tax on gains on capital and not a tax on income. The costs of acquiring, development and maintenance of the capital item will be allowable.

Remember this tax becomes payable only after selling/transfer of the property, how they will deal with capital allowances claimed before sale is another issue.


Not true: consider this, CGT is charged on gain, not the whole amount, hence the cost of land as well as the cost in developing it (with valid proof) is considered. First deduct cost to derive the "gain" which is then taxed. Otherwise you'd pay 30% on the sale price which does not make sense
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sparkly
#49 Posted : Thursday, September 11, 2014 12:55:26 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
Internet wrote:
It means i will have to pay 30%. :(


You are allowed to dedct your expenses if you treat it as a business income eg costs of purchase, interest, loan, legal fees, valuation, salaries etc. Record keeping is key.
Life is short. Live passionately.
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sparkly
#50 Posted : Thursday, September 11, 2014 12:58:25 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
kiwaru wrote:
Mucene wrote:
jawgey wrote:
kazee wrote:
So if i buy land for 1m, use 3m to develop it and sell the property for 8m, do i pay 5% on (8m-1m)=7m or what? Coz the difference is not all profit, 3m was used to develop the empty land.

Tax accountants?


Development of land is a capital expenditure so there's no way KRA will allow that expense.

you will only be able to claim capital allowances when declaring your income. e.g. rental income.

otherwise capital gains will apply to the (8-1)=7m which is the effective gain doesn't matter if there are legal fees, valuation fees et al involved.


This is a tax on gains on capital and not a tax on income. The costs of acquiring, development and maintenance of the capital item will be allowable.

Remember this tax becomes payable only after selling/transfer of the property, how they will deal with capital allowances claimed before sale is another issue.


Not true: consider this, CGT is charged on gain, not the whole amount, hence the cost of land as well as the cost in developing it (with valid proof) is considered. First deduct cost to derive the "gain" which is then taxed. Otherwise you'd pay 30% on the sale price which does not make sense


Revaluation gains are not taxed.
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