Understanding Kenya’s CGT Turning Point: How the 2022 Rate Change, the Haria Ruling, LSK v KRA, and the Finance Act 2023 Redefined “Transfer”

When Kenya’s Finance Act 2022 came into effect on 1 January 2023, few anticipated that the most contentious battles would arise not from the rate itself, but from the question of timing. The period between December 2022 and January 2023 became a technical minefield for taxpayers who had completed share transfer transactions under the old 5% regime only to face KRA reassessments at 15% based on transfer registrations completed in the new year. What followed was a legal and administrative reckoning that reshaped how Kenya determines the CGT tax point.

This transition period became problematic for many taxpayers who executed share sale transactions in December 2022, while the physical stamping or registration of transfer instruments occurred weeks later in January 2023. This ambiguity created room for the Kenya Revenue Authority to argue that the registration date, rather than the completion date, was the relevant moment for determining which tax rate applied. The stakes were significant: a transaction substantively concluded under a 5% regime faced the very real threat of being taxed at 15% solely because the stamp came late.

There had previously been contentions over the CGT tax point pre 2017 on Paragraph 11A of the Eighth Schedule to the Income Tax Act, a provision that effectively required taxpayers to pay CGT before property transfer, specifically at the time of lodging an application for registration. The High Court had settled the matter in Law Society of Kenya v KRA by declaring paragraph 11A as unconstitutional, finding it vague, unfair, and inconsistent with both Paragraph 2 and Paragraph 6(1)(a), which firmly anchor CGT to the actual transfer of property, not pre‑transfer administrative steps.

The implications of the 2017 decision resurfaced during the transition period brought about by the Finance Act; 2022 culminating in a decisive ruling by the High Court in Haria v Commissioner of Domestic Taxes, delivered on 1 August 2025. In Haria, the taxpayer had sold shares and received full payment on 30 December 2022, paying the correct 5% CGT. However, the stamp duty process took place in January 2023, after the 15% regime had begun. KRA argued that the later stamping date fixed the tax point and therefore the higher rate applied. The High Court rejected this reasoning unequivocally. It held that the legal and economic transfer of shares occurred on 30 December 2022, when the seller had parted with ownership and received consideration.

The courts also clarified that where a transaction is subject to regulatory approvals as is common in bank or telecom share transfers the transfer does not occur until those approvals are granted. Where transfer is subject to contractual conditions, then transfer happens when the conditions are met.

The Finance Act 2023 introduced a statutory mechanism to provide administrative clarity that had long been missing. The Act clarified the CGT point is the earlier of the date the transaction is completed and payment received, or the date the application for transfer is lodged or the instrument is registered. This legislative direction was intended to reduce disputes, but the courts, especially in Haria have insisted that administrative steps such as stamping cannot override the substantive moment of transfer for the purpose of determining the CGT rate. Finance Act 2023 therefore complements, rather than contradicts the jurisprudence by acting as a timing guide while respecting constitutional limits.

These shifts collectively reshape Kenya’s CGT landscape. Transactions that fall within the tax change period must now be analyzed with careful attention to actual transfer mechanics. It is my view that Haria ruling has strengthened taxpayer protection by compelling KRA to respect the substance of commercial transactions rather than rely on administrative convenience.