Capital Gains Tax (CGT) was re-introduced in Kenya effective 1 January 2015 , consequently, any gain on transfer of property, including shares, is now subject to CGT at the rate of 5%. However, its re-introduction has adversely affected some key sectors in the economy including the Nairobi Securities Exchange (NSE), which has seen a major decline in trading.

Furthermore, the Government has also faced a major challenge in ensuring compliance and administration of CGT, especially on the transfer of shares that are listed on the NSE. In an effort to mitigate this and to encourage trading of shares on the NSE, the Government through the Finance Act 2015 has amended the Income Tax Act. The amendments exclude the transfer of shares traded on any securities exchange licensed by the Capital Markets Authority (CMA) from the provisions of Section 3(2) (f), of the Income Tax Act. The Exclusion means that any gain on transfer of shares that are listed on the NSE (and any other securities exchange that is licensed by the CMA) will not be subject to both CGT and Withholding Taxes. It is noteworthy that this will only take effect from 1 January 2016 and will only apply to shares transferred after this date.

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