Notes on Land Taxes in Kenya

By
John Mugiya Njoroge
ESSQ/ 02664/2019
B.ENG (Geospatial)

Submitted to
George Konguka

2nd November, 2023

Introduction
Real estate business in Kenya is categorized into two, commercial and residential. KRA recently
launched its 8th Corporate Tax Plan with key focus being the implementation of the Tax Base
Expansion strategy which seeks to recruit new taxpayers. To achieve this, the KRA has
identified persons involved in the real estate sector as being integral to the achievement of its
goal. The following taxes are common to persons involved in buying and selling of land or real
property:
 Stamp Duty
 Rental Income Tax
 Land Rent
 Land Rates
 Capital Gain Tax
1. Stamp Duty
This is the tax paid during the purchase of a property and is based on the sale price of the
property. Its rate is 4% in urban areas and 2% in rural areas. Stamp duty exemption can occur
under the following scenarios:
i. Transfer between spouses
ii. Transfer in favor of any body established for charitable purposes.
iii. Transferring between associated companies
iv. Transfer to a limited liability company held wholly by same family members.
It must be paid within 30 days after receiving the documents. Failure to pay this revenue will
result in the invalidity of the transaction and agreement signed by both parties. It will also result
into a fine that is assessed at 5% of the principal assessed Stamp Duty for every quarter of the
date of instrument. This revenue is paid to the KRA through iTax portal.

2. Rental Income Tax

i. Residential property and Mixed-Use Properties Rent Taxes
This tax is paid by people with rental incomes of Kshs 144000 to 10000000 per annum. It must
be filed every month on or before 20th without expenses, losses or capital deduction. Persons
with below Kshs 144000 or above 10000000 rental income per year is required to file annual tax
returns and declare the rental income with income from other sources. Failure to file before or on
20th attracts a penalty of 20000 or 5% of due tax, or whichever is higher, and subsequent interest
of 1% per month on the unpaid tax until payment is made in full.

ii. Commercial Property Rent Taxes

VAT is chargeable on commercial rental income and is charged to the tenant at a rate of 16 %.
However, the VAT on the sale of commercial property declared illegal for the sale of
commercial property. Other commercial income is required to file annual returns and declare
rental incomes.
 3. Land Rent
Land rent is paid to the ministry of lands for leasehold titles. The land rent is usually stated on
the certificate of title and is usually revisable. Most land rents are revised during renewal and
extension of leases. The rent is paid at 0.3% of the property value per month. For instance, a land
worth 600000 will have a monthly land rent of 2000.

4. Land Rates
Land rates are paid to the county government on an annual base for both leasehold and freehold
properties. The land rates are governed by the Rating act. The fees are based on the unimproved
site value of the property which are based on the Valuation Roll, which is revised every now and
then for updating.

5. Capital Gain Tax

This tax is levied on the transfer of property situated in Kenya, acquired on or before 2015. It is
paid by the seller. It is a final tax and is subject to further taxation after the payment of the 5%
net gain tax. The following are exceptions on Capital Gain Tax:
 Income that is taxed elsewhere as in the case of property dealers.
 Issuance by a company of its own shares and debentures
 Disposal of property for the purpose of administering the estate of a deceased
person.
 Transfer of property between spouses as a part of a divorce settlement.
 A private residence if the individual owner has occupied the residence
continuously for the three-year period immediately prior to transfer.
 Agricultural property having an area of fewer than 100 acres where that property
is situated outside a municipality or urban area.