Wazua
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The Capital Gains Tax
Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@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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Rank: Elder Joined: 11/7/2007 Posts: 2,182
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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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Rank: Member Joined: 8/4/2012 Posts: 155 Location: Kenya
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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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Rank: User Joined: 1/20/2014 Posts: 3,528
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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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Rank: New-farer Joined: 12/16/2009 Posts: 33
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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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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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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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Rank: New-farer Joined: 12/16/2009 Posts: 33
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It means i will have to pay 30%. :(
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Rank: Member Joined: 8/5/2011 Posts: 125
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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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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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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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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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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. Life is short. Live passionately.
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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Mainat wrote:I would be surprised if our CGT doesn't match our neighbours i.e. 20-30% before 2017.
We are like frogs in a sufuria. Temperature is now set at 5 degrees It's now law: http://www.businessdaily.../-/fx4u2rz/-/index.html
"I think given the fact that it is optically such a low number, and keeps Kenya at the bottom of capital gains tax... we'll look through this and move on," said Aly Khan Satchu, independent analyst. "If ... they are thinking of putting it higher, then I think we are in a little different situation." The opposite of courage is not cowardice, it's conformity.
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Rank: Member Joined: 6/10/2006 Posts: 201 Location: Nairobi
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5% similar to withholding tax....not too bad.
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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How will CGT on shares be remitted? By stock brokers?
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Rank: Elder Joined: 9/29/2006 Posts: 2,570
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sizzla wrote:5% similar to withholding tax....not too bad. It's also tax on "gains". So it's true not much! but it can be increased later to 10%. The opposite of courage is not cowardice, it's conformity.
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Rank: Member Joined: 5/14/2014 Posts: 288 Location: nairobi
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if i had bought britam at sh5, is it advisable to sell at sh 30 to avoid taxation of my sh25 profit? Then one can buy again around jan so that earlier accrued profits are not taxed. but maybe the transaction costs even this out. #hesabungumu I find satisfaction in owning great business,not trading them
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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target1360 wrote:if i had bought britam at sh5, is it advisable to sell at sh 30 to avoid taxation of my sh25 profit?
Then one can buy again around jan so that earlier accrued profits are not taxed.
but maybe the transaction costs even this out. #hesabungumu The 5% CGT is almost negligible but when/if it's increased to 10/20/30% that's when you'll start doing your maths and the index will be heading south.
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Rank: Elder Joined: 6/2/2011 Posts: 4,818 Location: -1.2107, 36.8831
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Can we say that this CGT thing is for real. I can see ex-President Kibaki has disposed off his building mapema mapema. Mwai Kibaki Sells Nairobi Building Receive with simplicity everything that happens to you.” ― Rashi
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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Nice move economist no.1. we'll follow your lead 
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Rank: Member Joined: 1/13/2014 Posts: 386 Location: Denmark
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haha that's the first thing I thought of when I read that piece .. Let's brace thyself for CGT. Seeing is believing
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Rank: Elder Joined: 9/15/2006 Posts: 3,905
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Following some Wazua tweets; very good updates from @RobertYawe who's attending a PKF Capital Gains Tax seminar. Some scary...
1. KRA has decided to challenge the definition of the words "avoidance" & "evasion" by indicating that they are similar @wazua
2. @wazua shares traded on the NSE by an individual are exempt from CGT therefore those Chama's are in trouble
3. @wazua Rural agricultural land of less than 100 acres is exempt from CGT so those subdivision experts are in the clear
4. @wazua individuals who have lived in a property for more than 3 years before disposal are exempt from CGT
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