Real estate investment in Kenya comes with several tax obligations that every buyer, seller, landlord, or developer must understand. Whether you’re purchasing land, renting out property, or selling a home, it’s essential to know your tax responsibilities to avoid penalties and optimize your returns.
🧾 Types of Real Estate Taxes in Kenya
There are several taxes associated with real estate ownership and transactions in Kenya. Here’s a breakdown of each:
1. Land Rates (Property Tax)
- Who Pays: Property owners at the county level
- How Often: Annually
- Collected By: County governments
- Rate: Varies by location and value; typically a percentage of the rateable value set by the county
📌 Example: If your property has a rateable value of KES 2 million and the rate is 0.5%, you’ll pay KES 10,000 per year in land rates.
2. Stamp Duty
- Who Pays: Buyer or transferee
- When Paid: Upon transfer of property ownership
- Collected By: Kenya Revenue Authority (KRA )
- Rates:
- Residential properties: 1% of transaction value
- Commercial properties: 2%
- Transfer between spouses: Exempt
📌 Example: Buying a residential property worth KES 5 million? You’ll pay KES 50,000 as stamp duty.
3. Capital Gains Tax (CGT)
- Who Pays: Seller of property or land
- When Paid: On disposal of property
- Rate: 5% of net gain (calculated after deducting costs like purchase price, legal fees, and improvements)
- Exemption: Sale of a person’s primary residence may qualify for exemption if conditions are met
📌 Example: If you sell land for KES 10 million and your adjusted cost basis is KES 7 million, your taxable gain is KES 3 million. CGT = 5% × KES 3 million = KES 150,000.
4. Value Added Tax (VAT)
- Who Pays: Buyer of new property
- Applicable To: Newly constructed property or land sold by registered developers
- Rate: 8% on the sale price
- Exemption: Second-hand homes and land transfers between individuals
📌 Note: VAT does not apply to bare land unless part of a development package.
5. Withholding Tax on Rent
- Who Pays: Tenant or agent paying rent
- Applicable To: Rental income received by landlords
- Rate:
- Residents: 10%
- Non-residents: 15%
- Collected By: Withheld at source and remitted to KRA
📌 Example: If you receive KES 50,000 monthly rent, the tenant should withhold KES 5,000 and remit it to KRA.
6. Transfer Pricing Rules (for large-scale transactions)
- Applies to related-party transactions (e.g., between companies under common control)
- Ensures fair market pricing and prevents tax avoidance
📋 Summary Table of Real Estate Taxes in Kenya
| Tax Type | Payer | Rate | Notes |
|---|---|---|---|
| Land Rates | Owner | Varies | Paid annually to county government |
| Stamp Duty | Buyer | 1% (residential), 2% (commercial) | Paid on property transfer |
| Capital Gains Tax | Seller | 5% of net gain | Exemption for primary residence |
| VAT | Buyer | 8% | Applies to new developments |
| Withholding Tax on Rent | Tenant | 10% (resident), 15% (non-resident) | Must be remitted to KRA |
🏛️ Where to Pay Real Estate Taxes
All national-level real estate taxes (stamp duty, CGT, VAT, withholding tax) are administered by the Kenya Revenue Authority (KRA) . Payments can be made through:
- KRA iTax Portal : https://itrust.kra.go.ke
- M-Pesa (Pay Bill Number 500003)
- Bank payments via KRA-approved banks
- County Treasury for land rates
🧮 Example: Full Breakdown of Taxes When Buying a House
You buy a newly built house in Nairobi for KES 8 million .
| Tax | Amount |
|---|---|
| VAT (8%) | KES 640,000 |
| Stamp Duty (1%) | KES 80,000 |
| Total Additional Costs | KES 720,000 |
👉 Your total payment would be approximately KES 8,720,000 .
🚫 Exemptions & Reliefs
Certain transactions may qualify for tax relief or exemptions:
- Primary Residence Exemption: No CGT on sale of main home (if used for at least 3 years)
- Spousal Transfers: Exempt from stamp duty
- Government Housing Schemes: May enjoy reduced duties
- Non-Profit Organizations: Some exemptions apply
- Diplomats and International Staff: Special rules apply
Always consult a tax professional or KRA for clarification before finalizing any transaction.
🔁 Tax Implications for Real Estate Investors
If you’re investing in property for rental income or resale, here are some key considerations:
- Rental Income: Taxable at 30% corporate tax if through a company, or personal income tax if individual
- Depreciation: Not allowed for residential property, but commercial buildings may qualify
- Record Keeping: Maintain all receipts and invoices for CGT calculations
- Tax Filing: File annual returns with KRA even if no income was earned
❓Frequently Asked Questions (FAQ)
Q1: Do I pay tax when buying land in Kenya?
A: Yes, you pay stamp duty (1% for residential, 2% for commercial). VAT only applies if the land is part of a new development.
Q2: Is there property tax in Kenya?
A: Yes, called land rates , paid annually to the county government based on the property’s rateable value.
Q3: What is Capital Gains Tax in Kenya?
A: It’s a 5% tax on the profit made when selling property or land.
Q4: Are rental incomes taxed?
A: Yes, rental income is taxable. Tenants must also deduct withholding tax (10% for residents, 15% for non-residents).
Join The Discussion