No capital gains tax due for stock traders as Uhuru scraps levy

President Uhuru Kenyatta
President Uhuru Kenyatta. PHOTO/FILE
Kenya has abolished all taxes imposed on profits made from the sale of shares and bonds through the Nairobi bourse in a bid to spur investments into the country’s stock market.

President Uhuru Kenyatta on September 11 signed into law the Finance Bill 2015 abolishing both the capital gains tax and the withholding tax of 0.3 per cent on all securities traded on the Nairobi Securities Exchange (NSE), effective January 1, 2016.

Securities trading off the NSE will, however, attract a capital gains tax of five per cent.

According to the Act, “a gain on transfer of securities on any securities exchange licensed by the Capital Markets Authority is not chargeable to tax”.

The new law has also lowered corporate tax for companies seeking to list on the stock exchange from 30 per cent to 25 per cent for a period of five years from the date of listing.

The move has been applauded by key market players who said it would help win back foreign investors who had fled the NSE in favour of other markets – leading to a steep drop in prices of shares on the bourse.

Geoffrey Odundo, NSE chief executive, said: “This tax really affected our market in terms of interest from foreign investors. It has been a disincentive. It sent a lot of jitters through the market.”

President Kenyatta last September signed into law a bill that reintroduced capital gains tax in Kenya in nearly three decades sparking an outcry among capital markets stakeholders.

In response to the outcry, the Treasury Cabinet Secretary Henry Rotich – in his budget speech in June – replaced the CTG with a 0.3 per cent withholding tax on the values of shares traded.

However, the Kenyan parliament voted to remove both taxes from listed securities traded on the NSE.