Capital gains tax in Kenya is usually the single largest tax cost in a founder's exit, and it is almost always the one planned for last. It surfaces in the final weeks before completion, when the structure is fixed, the price is agreed, and there is nothing left to manage. By then CGT has stopped being a planning question and become an arithmetic one.
This article sets out how Kenyan CGT actually works on a company sale, what the Finance Act 2026 changed — particularly for offshore and group structures — and why the documents sitting in your company secretary's file determine how much of the price you keep.
The mechanics
Kenya charges CGT at 15% on the net gain arising on the transfer of property situated in Kenya. For founders, the relevant property is almost always shares in an unlisted company, land, or both.
The gain is the transfer value less the adjusted cost. Adjusted cost is not simply what you paid. It includes:
the original acquisition or subscription cost of the shares
subsequent amounts subscribed, including loan capital properly converted into equity
incidental costs of acquisition and disposal — legal fees, valuation fees, brokerage and advisory costs directly connected to the transaction
for land, the cost of capital improvements
CGT is a final tax and it falls due on transfer, not at year end. That places it inside the completion mechanics of the deal rather than in your annual compliance cycle. Buyers, their advisers and the registries will expect to see it dealt with before the transfer is given effect, which means it has to be funded out of the transaction itself.
What the Finance Act 2026 changed
The Finance Act 2026, with most provisions effective from 1 July 2026, made several amendments that matter directly to exits.
Indirect transfers. Kenya's Eighth Schedule already contained indirect-disposal provisions, including a test capturing the alienation of shares that derived more than 20% of their value from immovable property situated in Kenya during the preceding 365 days. The Act adds a further limb, extending CGT to gains derived by a non-resident from the alienation of shares where those shares derive their value from Kenya, or where the alienation results in a change in the group membership of a Kenya-resident company, or in the ownership of, title in, or interest in property located in Kenya.
The reach of that drafting is wide. Practitioners have noted that it carries no de minimis threshold, meaning it could in principle apply to any non-resident holding company with a Kenyan subsidiary among its assets, however small Kenya's contribution to overall value. The mechanics of computation — whether the whole gain or only the Kenya-derived portion is taxed, and how the apportionment is performed — remain unsettled.
For founders whose cap table includes an offshore holding company, often inserted years earlier at the request of a foreign investor, this is the material change. A sale executed at the offshore level may now carry a Kenyan tax cost, and the question of who bears it is a negotiation that has to happen before heads of terms rather than after.
REIT transfers. Gains on the transfer of property into a registered Real Estate Investment Trust are exempt from CGT, with associated stamp duty relief. The policy signal is clear: capital is being steered toward formal, regulated investment vehicles.
Anti-avoidance. General anti-avoidance provisions were strengthened and better aligned across tax heads. The practical effect is that restructuring undertaken shortly before a sale, with a visible tax motive and a thin commercial rationale, now carries materially more risk than it did.
Dividends. The Act also removed the preferential 5% withholding rate on dividends paid to citizens of EAC partner states, bringing them into the standard non-resident regime at 15%. For founders with regional shareholders, that changes the arithmetic of extracting value through dividends ahead of a sale.
A worked illustration
A founder subscribed for shares in her company in 2014 for KES 10 million, and in 2019 converted a KES 5 million shareholder loan into equity. In 2026 she sells her entire stake for KES 90 million, incurring KES 3 million of legal and advisory fees directly related to the sale.
Transfer value: KES 90 million
Adjusted cost: KES 10m + KES 5m + KES 3m = KES 18 million
Gain: KES 72 million
CGT at 15%: KES 10.8 million
Now remove one document. If she cannot evidence the loan conversion — no board resolution, no return of allotment, no bank trail — her cost base drops to KES 13 million, her gain rises to KES 77 million, and her tax increases by KES 750,000.
That is the whole lesson in a single line. Your cost base is not what you spent; it is what you can prove you spent. A missing CR12 or an unfiled allotment return from a decade ago converts directly into cash paid to KRA.
Stamp duty is a separate, negotiable cost
Transfers of unlisted shares attract stamp duty, and transfers of land attract substantially more — typically 4% of value for property within municipalities. Convention places share transfer duty on the buyer, but convention is not law and it is routinely traded in negotiation. More importantly, a buyer who expects to pay it prices it into the offer, which means you pay it indirectly whatever the agreement says.
Any net-proceeds calculation that omits stamp duty is wrong, and in an asset deal involving land it can be wrong by a large margin.
Why structure changes the answer
The same business, sold for the same headline price, produces materially different net outcomes depending on how the transaction is framed.
In a share sale, the shareholder pays CGT on the gain on the shares and the company passes to the buyer with its entire history attached. One layer of tax, one taxpayer.
In an asset sale, the company disposes of assets and bears tax on the gains within its own computation. The shareholders then face a second charge when the after-tax proceeds are distributed or the company is wound up. Two layers.
A transfer of a business as a going concern is exempt from VAT under the First Schedule to the VAT Act, which can preserve significant cash in an asset-based transaction — but only where the transfer genuinely satisfies the conditions.
These are not interchangeable options you can switch between late in a process. The buyer has its own strong preferences, usually the opposite of yours, and by the time a term sheet is signed the structure is effectively settled.
Where Kenyan exits actually lose money
Three patterns recur.
An unprovable cost base. Share certificates, returns of allotment, board resolutions, bank evidence of every subscription and conversion. Companies that have been through multiple rounds, conversions and informal transfers between family members frequently cannot reconstruct this, and the gap is taxed at 15%.
Timing mismatches between tax and cash. Where consideration is deferred or contingent on an earn-out, the moment CGT crystallises and the moment you receive the money may be years apart. A founder who agrees payment terms without modelling this can find themselves funding a tax liability out of savings on money they have not yet collected.
Tax risk priced as a discount. Buyers demand warranties and indemnities covering historic tax years. A company with current compliance certificates, filed returns and no open KRA disputes negotiates a modest retention. A company with unresolved exposures negotiates a large escrow, broad indemnities and a lower price — and the discount usually exceeds the underlying exposure, because buyers price uncertainty conservatively.
The questions that determine your net proceeds
Can you evidence, today, the full subscription history of every share you hold?
If there is a non-resident entity anywhere in your ownership chain, does the 2026 indirect-transfer limb reach your sale — and who has agreed to bear that cost?
Under which structure does your particular asset mix produce the better after-tax result, and will the buyer accept it?
Where consideration is deferred, when does the charge arise relative to receipt?
Does any restructuring you are contemplating have a commercial rationale that would withstand scrutiny under the strengthened anti-avoidance rules?
These questions have concrete answers for your company. They depend on your cap table, your asset mix, your buyer and your timeline — which is precisely why no article can answer them for you.
Where founders need guidance
The founders who keep the most of their sale price are not the ones who found a clever structure in the closing weeks. They are the ones who modelled their after-tax position two or three years out, fixed the documentary gaps while there was still time, and walked into negotiations knowing their own numbers better than the buyer did.
Acquihub advises East African founders on exit structuring and orchestration, including modelling net proceeds across alternative deal structures before you commit to one. If you are contemplating a sale, carry an offshore entity in your structure, or simply want to know what your exit would cost you in tax today, get in touch.
Frequently asked questions
What is the capital gains tax rate in Kenya? 15% on the net gain arising from the transfer of property situated in Kenya, including shares in unlisted companies and land.
When is CGT payable on a share sale in Kenya? CGT is a final tax that falls due on transfer rather than at the end of the tax year, so it forms part of the completion mechanics of the deal. The precise timing and documentation requirements should be confirmed for your transaction.
Can I avoid Kenyan CGT by selling through an offshore company? This has become considerably harder. The Finance Act 2026 extended CGT to gains derived by non-residents from alienating shares that derive their value from Kenya, or where the alienation changes the group membership of a Kenya-resident company. Offshore structures created for earlier purposes should be reviewed on their current facts.
Who pays stamp duty on a share transfer in Kenya? By convention the buyer, but it is negotiable and will be reflected in the price either way. Land transfers attract higher rates, typically 4% of value for urban property.
Does CGT apply if I sell the business assets instead of the shares? Gains on assets are taxed within the company, and shareholders face a further charge when proceeds are extracted. The transfer of a business as a going concern can be VAT-exempt, but the overall tax outcome is usually different from — and often worse for the seller than — a share sale.
Do legal and advisory fees reduce my CGT? Incidental costs directly connected to the acquisition and disposal can form part of the adjusted cost, which reduces the taxable gain. Whether a particular cost qualifies depends on its nature and your ability to evidence it.