Kenya's capital gains tax (CGT) framework, currently at 15%, is a critical source of government revenue and aims to reduce economic inequality. However, there are growing calls for reform to ensure fairness, especially concerning the impact of inflation on long-term investments.

• CGT is levied at 15% on profits from the sale of property, defined broadly to include land and shares.
• The current system does not account for indexation, meaning investors pay tax on nominal gains that may be eroded by inflation, leading to unfair outcomes for long-term investors.
• For instance, a Ksh 1.5 million nominal gain on a Ksh 1 million land purchase over 20 years, with 6% annual inflation, would actually be a real gain of only Ksh 300,000.
• Kenya's Income Tax Act provides exemptions for corporate restructuring and the sale of primary residences valued under Ksh 3 million, intended to support business continuity and individuals.
• The article, authored by consultants within PwC’s tax line of service, emphasizes the need for a balanced approach to CGT to avoid discouraging investment and promoting capital flight.