Spotlight: Softening Tax Collections from Land and Share Deals



Recent reports highlight an emerging challenge facing the Kenya Revenue Authority (KRA): tax revenues from land transactions and private share deals are under pressure due to rising legal disputes on capital gains tax (CGT) timing and applicability.

 

What’s Driving the Disputes?

The core contention lies in when CGT becomes payable. KRA insists tax is due when full payment is made, irrespective of when contracts were signed or registered. Taxpayers counter that liability arises when the sale contract is executed, and payment occurs—not during later administrative formalities such as registration or stamping.

This divide intensified after the January 2023 CGT rate hike from 5% to 15%, with taxpayers disputing KRA’s retrospective application of the new rate to transactions spanning that period.

 

Court Ruling Update: Haria v Commissioner of Domestic Taxes (2025)

A pivotal High Court ruling sided with taxpayers, affirming that CGT triggers at the point of sale and payment, not registration completion. Applying the increased CGT rate retroactively was deemed a violation of legal certainty.

This judgment may weaken KRA’s reassessment efforts on past deals and could influence similar arguments in land transactions.

 

Why Are Tax Collections Softening?

  • Successful Appeals: Courts increasingly overturn KRA’s assessments, reducing collectible revenues.
  • Transaction Slowdown: Tax uncertainties prompt investors to delay or reconsider land and share deals.
  • Administrative Burden: Litigation strains KRA’s resources, slowing tax recovery.
  • Cautious Enforcement: KRA may moderate aggressive tax collection efforts to avoid further legal reversals.

 

Implications for Stakeholders

Investors: Greater clarity on CGT liability timing enhances planning confidence.
KRA: Reduced revenue forecasts from property and share sales pressure diversification of tax sources.
Policymakers: There is a critical need for clear legislative frameworks to ensure transparent, predictable taxation and reduce future disputes.

 

RWK Africa’s Perspective

Recent court developments reinforce fairness and non-retroactivity principles in tax law. Taxpayers engaged in land or share deals must proactively structure transactions and document sale and payment dates to minimize future disputes

 

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