Uhuru’s New Tax Proposals Signal Rise In Property Prices

Treasury’s new measures to plug loopholes that property dealers use to avoid paying taxes are expected to add impetus to real estate price inflation, as agents pass on the additional levies to home buyers, Business Daily Africa reported. The new measures contained in Finance minister Uhuru Kenyatta’s Budget proposals require real estate developers and land dealers to pay taxes on gains made from the appreciation in the value of properties sold. Kenya Revenue Authority (KRA) has since issued a directive asking dealers in immovable property to pay taxes on capital gains made in their transactions. The directive states that the sale of immovable property will be considered as business income — where it is identified as a core activity in the company’s memorandum and articles of associations, where acquisition was with the aim of disposing it thereafter for a profit, where property transactions are recurrent and where property was acquired with aim of developing and selling it thereafter.” Real estate agents and land brokers currently do not pay taxes on valuation increases during property sales, as capital gains are not taxable in Kenya. Property owners are required to pay stamp duty of four per cent on transfer of urban properties and two per cent for rural properties. Business income tax is set at 30 per cent. Read more.