Blogs
What's New Trending
Real Estate Taxation in Kenya: A Complete Guide for Property Investors in 2025
Kenya’s real estate sector remains a top choice for investors seeking long-term wealth through rental income, capital appreciation, and portfolio diversification. However, success in property investment goes beyond location and demand, tax compliance is equally critical. Understanding the different types of real estate taxation in Kenya ensures legal compliance, improves financial planning, and helps you maximize your returns. This professional guide covers the key taxes affecting property investors in Kenya in 2025.
Types of Taxation in Kenya for Real Estate Investors
Real estate investors in Kenya are subject to four primary taxes:
- Capital Gains Tax (CGT) – charged on profits from selling property
- Stamp Duty – paid when transferring property ownership
- Rental Income Tax – levied on income received from tenants
- Land Rates – annual levies imposed by county governments
Each tax has specific rules, rates, deadlines, and exemptions. Below is a detailed breakdown.
- Capital Gains Tax (CGT)
What is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax charged on the profit made from the transfer of property situated in Kenya. This includes:
- Gains accrued by a company, individual, or partnership on or after January 1, 2015.
- Gains from the sale of shares in foreign entities that derive more than 20% of their value from immovable property in Kenya (effective July 1, 2023).
- Gains from the disposal of shares in a Kenyan company by a non-resident who owns more than 20% of its share capital (effective July 1, 2023).
Who Pays CGT?
The seller (transferor) is responsible for declaring and paying CGT.
What is the CGT Rate?
The current rate is 15% of the net gain. This is a final tax and is not subject to additional taxation.
When is CGT Payable?
The due date is the earlier of:
- Registration of the transfer instrument in favor of the buyer, or
- Receipt of the full purchase price by the seller
How to Compute Capital Gains Tax
Net Gain = (Transfer Value – Incidental Costs on Transfer) – (Acquisition Cost + Incidental Costs on Acquisition + Enhancement Costs)
Also Read: Kenya’s New Visa-Free Policy: A Gateway to Real Estate Investment and Pan-African Growth
What is Considered a Transfer?
A transfer includes:
- Sale, exchange, or gift of property
- Abandonment, surrender, or expiration of property rights
- Loss, destruction, or extinction of property (unless reinstated within one year)
Allowable Expenses for CGT Computation:
- Cost of acquisition or construction
- Legal fees
- Property valuation costs
- Advertising expenses
- Loan or mortgage interest
- Enhancement costs
How to Determine the Transfer Value:
- Amount received from the sale or transfer
- Sums received for surrender, abandonment, or forfeiture
- Compensation or insurance payments for damage or loss
- Income from exploitation (e.g. rent, royalties)
CGT Exemptions and Non-Taxable Transfers:
- Property income already taxed elsewhere
- Issuance of company shares or debentures
- Transfer to secure or repay a loan
- Inheritance or transfer by personal representatives
- Transfers between spouses or during divorce
- Transfers to immediate family
- Transfers to a company fully owned by a spouse or family
- Private residences occupied for the last three years
- Internal group restructures (over 24 months old, no third-party involved)
How to Pay CGT in Kenya:
- Log in to iTax: https://itax.kra.go.ke
- Generate a payment slip
- Pay at a KRA-appointed bank using cash, cheque, or RTGS
- The payment slip is valid for 30 days
- Stamp Duty Tax
Stamp duty is a tax on legal documents during property transfers. It is calculated as a percentage of the property’s sale price.
Who Pays Stamp Duty?
The buyer is responsible for paying stamp duty.
Stamp Duty Rates:
- 4% for properties in municipalities
- 2% for properties in rural areas
Payment Deadline:
Must be paid within 30 days of executing the sale agreement.
Stamp Duty Exemptions:
- Transfers of family property upon death
- Transfers between spouses
Failure to pay invalidates the transaction and renders related documents unenforceable in court.
- Rental Income Tax
Rental income tax applies to income from both residential and commercial rental properties.
Residential Rental Income:
As of January 2024, landlords earning Ksh 288,000 to Ksh 15 million annually pay a flat 7.5% tax on gross rent. This is treated as final tax, with no deductions.
Commercial Rental Income:
For income above Ksh 15 million, the following applies:
- 30% Corporate Tax for companies
- Graduated Income Tax scale for individuals
Filing and Payment:
- Tax returns must be filed monthly
- Payment is due by the 20th day of the following month
Read More: Investing in Real Estate in Kenya: Mortgage vs Cash Payment Plans
Penalties for Non-Compliance:
- Individuals: Ksh 2,000 or 5% of tax due (whichever is higher)
- Companies: Ksh 20,000 or 5% of tax due (whichever is higher)
- Interest: 1% per month on unpaid tax
- Land Rates
Land rates are annual levies imposed by county governments on landowners.
How Are They Calculated?
Based on the unimproved site value (USV) of the property.
Nairobi County Example:
Apartment owners pay 0.115% of assessed land value. Payment is due by March 31st annually.
Penalty for Late Payment:
- 3% monthly interest on unpaid balance
- Issuance of rates clearance certificate upon full payment
Professional Tips for Real Estate Buyers & Sellers
For Buyers:
- Conduct due diligence on all applicable taxes
- Include tax costs in your purchase budget
- Confirm rates and taxes are up to date
- Consult legal and tax professionals
For Sellers:
- Maintain accurate records of acquisition, upgrades, and expenses
- Leverage available exemptions
- Time your transactions strategically to optimize CGT impact
Frequently Asked Questions (FAQs)
What taxes must real estate investors in Kenya pay?
Capital Gains Tax, Stamp Duty, Rental Income Tax, and Land Rates.
Who is responsible for paying Capital Gains Tax?
The seller of the property (transferor).
What is the CGT rate in Kenya?
15% of the net gain.
What is the new residential rental income tax rate?
7.5% of gross monthly rent for landlords earning between Ksh 288,000 and 15 million annually.
What happens if rental income tax is paid late?
You will incur penalties (Ksh 2,000–20,000 or 5% of tax due) and interest (1% monthly).
Conclusion
Navigating the taxation landscape in Kenya’s real estate market requires a strong understanding of various tax laws. From Capital Gains Tax and Stamp Duty to Rental Income Tax and Land Rates, investors must comply with legal obligations to protect and grow their investment.
By staying updated on tax changes, planning ahead, and seeking expert guidance, real estate investors in Kenya can manage risks, avoid penalties, and build wealth confidently.
For personalized tax advice, always consult a licensed tax consultant or real estate legal advisor.