The Income Tax (Amendment) Bill 2026, under consideration by the Kenyan Parliament, proposes to exempt certain property transfers from Capital Gains Tax (CGT) and anti-avoidance safeguards.
According to the Office of the Controller of Budget (CoB) and Oxfam Kenya, the implementation of the CGT tax will prevent the misuse of public revenue.
Additionally, the Income Tax Bill 2026 was meant to facilitate business restructuring through the removal of CGT liabilities on transfers between a company and its shareholders.
The removal of the CGT liabilities on transfer during internal corporate reorganization would only be viable provided the transfers are proportionate to the existing shareholdings and involve no third parties.
However, the Office of the Controller of Budget and Oxfam raised concerns that the initial bill on CGT taxes would create opportunities for tax minimization.
In addition, the Controller of Budget stated that the exemption from CGT would allow high-net-worth entities to restructure without delivering corresponding benefits to the economy.
Controller of Budget’s Recommendations on Kenya Income Tax Bill 2026
The Office of the Controller of Budget has recommended introducing a clear threshold for large-scale reorganizations, including a prescribed limit of KSh 500 million for transfers during corporate reorganizations.
Any internal transfer exceeding the KSh 500 million limit will require an advance ruling from the Kenya Revenue Authority (KRA) before the CGT exemption can be applied.
Pre-approval from the KRA will allow the tax authorities to review and validate the transaction upfront for accountability according to the Controller of Budget.
“The CoB recommends that the Committee introduce: a mandatory 3-year post-enactment review of the exemption’s revenue impact; a requirement that reorganizations exceeding a prescribed threshold (e.g., KShs 500 million in asset value) obtain an advance ruling from KRA before the CGT exemption applies,” part of the statement from the Office of the Controller of Budget read.
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In addition, the CoB recommended additional anti-avoidance measures, including a requirement for all the property transferred back to a company to be the same asset and directly traceable.
Further, any internal reorganization undertaken with a CGT exemption must not result in any change to beneficial ownership for at least five years post-completion.
CoB further explained that, to avoid rapid exits and sell-offs to third parties, all reorganized entities would remain tax residents in Kenya for a minimum of three years.
Any arrangements made through undisclosed trusts and nominees will be explicitly excluded from the CGT exemption and any tax-avoidance scheme, according to CoB.
Moreover, any entity subject to the CGT tax exemption will undergo a post-enactment review of the exemption’s revenue impact after three years.
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Oxfam Kenya Implementation Proposal
Aligning with the CoB, Oxfam Kenya had advocated for a KSh 50 million limit on exempt asset transfers to any single shareholder during reorganizations.
Additionally, the company suggested that any transfer above the value limit should attract a 15% CGT on the excess, with the cap reviewed every three years by the Cabinet Secretary for National Treasury in consultation with the KRA Commissioner-General.
In addition, Oxfam criticized the Income Tax Bill 2026, citing that it lacked the offsets to compensate for foregone revenue.
To compensate for the revenue shortfall, Oxfam proposed a 5% surcharge on CGT liabilities when net capital gains exceed KSh 10 million in a tax year, with the proceeds ring-fenced for health and education.
According to Oxfam, the standard CGT rate on non-reorganization transfers should be increased from 15% the 20%.
Further, a minimum annual tax of 1% of net wealth for individuals with net wealth exceeding KSh 500 million should be introduced to ensure that the tax system redistributes wealth.
