The Treasury has moved to exempt internal property and share transfers within companies from capital gains tax (CGT), in changes meant to lower the cost of restructuring and succession planning.
The Income Tax (Amendment) Bill 2026, which has been tabled by the chairman of the Budget Appropriation Committee of the National Assembly and Molo MP Kimani Kuria, seeks to widen the gains on similar transactions that already enjoy exemptions from stamp duty, through the Finance Act of 2025.
‘The principal object of this Bill is to amend the Income Tax Act to provide for exemption of capital gains tax in the transfer of property by a company to its shareholders as part of an internal reorganisation, or on transfer of property to the company by the shareholders as consideration for the transfer,’ the memorandum of the Bill reads in part.
Companies carrying out internal reorganisation within the group had for years been subjected to the two taxes, raising the cost of non-commercial restructures. The taxes also made it costly for firms to settle internal transactions between shareholders using property and share transfers.
In Kenya, CGT is levied at a rate of 15 percent on a net gain when disposing of or transferring property, land, and shares.
There are exemptions for property transfers between immediate family or in divorce settlements, and on sales of listed shares at the Nairobi Securities Exchange.
Transfers between property dealers are also exempt from CGT, with the consideration being treated as trading income rather than a capital gain. Similarly, certain types of property transfers within real estate income trusts (Reits) are not subject to CGT.
Similar to Section 117 (1, r) of the Stamp Duty Act, the property being exempted from GCT in the Income Tax Act amendments should be transferred to the shareholders in proportion to the size of their stakes in the company immediately before the transfer.
In the case of shares, they must relate to a subsidiary of the company undertaking the transfer. Therefore, property and share transfers to third parties will not be exempt from the capital gains taxes.
Tax experts have welcomed the move to extend the tax exemption to CGT, saying that it aligns Kenya with global tax practices that make a distinction between non-commercial restructuring and ordinary asset transfers.
‘It will allow companies to do internal reorganisation more efficiently. We can also expect that the amendment will encourage such transactions to happen more frequently, because at times the shareholder you sit with is easier to deal with than an external party,’ said Alex Kanyi, a Partner at CDH Kenya.
Stamp Duty is levied at a rate of four percent for property transfers in urban areas in Kenya, and two percent in rural areas. For transfers of shares and increases in share capital, the rate stands at one percent.
Reits have also been pushing the Treasury to reinstate their exemption from Stamp duty for their property transfers in order to bolster appetite for alternative property investment channels in Kenya.
The transfer of property between development Reits and Investment Reits was exempted from Stamp duty as per Section 96A of the Stamp Duty Act, but this clause lapsed in December 2022. Therefore, all instruments executed after January 2023 have been liable for the full stamp duty.