Impact of increased Capital Gains Tax (CGT) in Kenya
The recent increase of Capital Gains Tax from 5% to 15% in Kenya has had a significant impact on the real estate market. The change, which went into effect on January 1st, 2021, has caused some concern among property owners and investors, as it could potentially decrease the value of their properties and make it more difficult to sell them.
The Capital Gains Tax, also known as CGT, is a tax that is applied when a property is sold. Under the previous tax rate of 5%, property owners were only required to pay a small percentage of the profit they made from selling their property. However, the new tax rate of 15% means that property owners will now have to pay a larger percentage of their profit to the government. This could make it more difficult for property owners to make a profit when selling their properties, and could also decrease the overall value of properties in the market.
The increase in Capital Gains Tax is likely to have a particularly strong impact on the high-end property market in Kenya. Properties in areas like Lavington, Kileleshwa, Karen, Kilimani, Westlands, Runda, Kynya, and Nyari are often more expensive, and the increase in CGT will likely make it more difficult for property owners in these areas to sell their properties at a profit.
The increase in Capital Gains Tax could also have an impact on the number of properties being sold in the market. Property owners may choose to hold onto their properties for longer periods of time, instead of selling them and paying the higher CGT. This could lead to a decrease in the number of properties being sold, which could have a negative impact on the overall real estate market in Kenya.
Despite the challenges, property owners and investors can still make smart decisions to minimize the impact of the new CGT rate. Consulting with a real estate agent, or a property valuer can help you to understand the local real estate market and make decisions based on the current market conditions. Additionally, seeking advice from financial experts on how to structure property sales or transfers in order to minimize the tax impact can also be beneficial.
In conclusion, the increase in Capital Gains Tax in Kenya will likely have a significant impact on the real estate market. The new tax rate of 15% could make it more difficult for property owners to make a profit when selling their properties, and could also decrease the overall value of properties in the market. However, property owners and investors can still make smart decisions to minimize the impact
