Kenya does about-turn, abolishes capital gains tax

Money Markets

Stockbrokers at the Nairobi Securities. Kenya is seeking to reform its capital markets to stimulate domestic development. PHOTO | FILE 

By JAMES ANYANZWA

In Summary

• President Uhuru Kenyatta on September 11 signed into law the Finance Bill 2015 abolishing both capital gains tax (CGT) of five per cent and the withholding tax of 0.3 per cent on all securities traded on the NSE.

Kenya has abolished taxes on profit made from the sale of shares and bonds through the Nairobi Securities Exchange (NSE) with effect from January 1, 2016 to restore investor confidence, boost trading and position the country as an attractive investment destination in Africa.

President Uhuru Kenyatta on September 11 signed into law the Finance Bill 2015 abolishing both capital gains tax (CGT) of five per cent and the withholding tax of 0.3 per cent on all securities traded on the NSE.

However, securities traded off the exchange through the Over-The-Counter market will attract a capital gains tax of five per cent.

And in an effort to reinforce its position as an international financial and business hub, Kenya has also scrapped stamp duty on transfers relating to real estate investment trusts (Reits) and lowered corporate tax for companies seeking to list on the stock exchange from 30 per cent to 25 per cent for a period of five years.

READ: Foreigners pull out cash from NSE for second time

The  Finance Act 2015 gives a 7-year window for potential issuers and owners of real estate property to transfer assets such as land or buildings into a Reit  without incurring prohibitive establishment tax costs that would previously have applied when transferring such assets into a Reit.

Key stakeholders in Kenya’s capital markets lauded the move, saying removal of taxes on securities traded on the exchange would rekindle interest among foreign investors  many of whom had fled the bourse in favour of  higher  yielding  markets  in West Africa such as Nigeria.

This led to a 40 per cent drop in the prices of shares on the NSE between January and September compared with the same period last year.

Read the rest on The EastAfrican