KRA to shelve tax exemptions on Capital Gains Tax transactions

COMMISSIONER ELIZABETH MEYO - KRA to shelve tax exemptions on Capital Gains Tax transactions
In a statement released on Tuesday, KRA Domestic Taxes Department Commissioner Elizabeth Meyo (pictured) said the administration of the tax has been migrated to the digital platform in a bid to catch tax cheats/FILE – KRA

NAIROBI, Kenya, Aug 27 – The Kenya Revenue Authority (KRA) has announced plans to shelve tax exemptions on some transactions that include the sale and transfer of property.

The announcement comes at a time where the tax collector said it had enhanced its online tax management system – iTax – through the development of exemption functions on Capital Gains Tax (CGT) transactions.

In a statement released on Tuesday, KRA Domestic Taxes Department Commissioner Elizabeth Meyo said the administration of the tax has been migrated to the digital platform in a bid to catch tax cheats.

“Through the system enhancement, all property transfer transactions declared as exempt from CGT will go through a verification and approval process,” read the statement.

She also stated that the authority has been mandated to give permission for transfers once the stated guidelines have been met.

“KRA shall grant or deny CGT exemptions depending on whether or not the transactions meet the exemption guidelines provided for in the Income Tax Act,” she added.

CGT is a tax chargeable on the transfer of a property such as land and buildings located within Kenya.

The system only exempts transactions that involve land whose value is not more than Sh3 million, agricultural property having an area of fewer than fifty acres and property which is transferred or sold for the purpose of administering the estate of a deceased person.

KRA said that it managed to increase its revenue collection by July 2019 following the roll out of the new mechanism on CGT.

“KRA’s collection on Capital Gains Tax in July 2019 to Sh580 million against a target of Sh391.2 million, which translated to a revenue performance of 151 percent on the CGT tax head,” said the tax collector.

With the new measures on CGT transactions, coupled with the revision of the CGT rate from five percent as proposed in the 2019/2020 Budget Statement to 12.5 percent effective October 1, 2019, KRA projects to realize more revenue on CGT in the current financial year.

Capital Gains Tax itself is also a tax base expansion measure to tap revenue from taxable transactions involving transfer of properties.

KRA has ensured automation of CGT on iTax, a strategy that marked a 100 per cent turning point from manual administration of CGT to online.

In 2017, KRA further twined CGT with stamp duty in the system, which made it mandatory for transacting parties to declare CGT before paying stamp duty.

These measures have seen KRA grow CGT revenues from Sh635 million in 2015 when the tax was reintroduced to an average of Sh3 billion in the last financial year.

Author: worldwidenewscast

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