Treasury secretary Henry Rotich has scrapped the controversial five per cent tax on the gains made from selling shares and instead introduced a 0.3 per cent withholding tax on sales value.
Capital gains tax (CGT) and levies on gambling winnings were introduced in the last financial year but enforcement has proved difficult due to ambiguous laws.
“The implementation of the law has faced some challenges in some sectors of the economy. In order to address these challenges and ensure enforceability and compliance, I propose to remove the five per cent tax on capital gains arising from sale of shares and introduce a 0.3 per cent withholding tax on the transaction value of the shares,” said Mr Rotich.
Resistance by the Kenya Association of Stockbrokers and Investment Banks (Kasib) has made the newly reintroduced tax difficult to enforce.
Kasib has argued that re-introduction of capital gains tax will make the Nairobi Securities Exchange (NSE) an unattractive investment destination and halt the move towards making the city an international finance centre.
Collecting tax on gambling winnings has proved difficult due to lack of clear guidelines.
Mr Rotich has introduced simple gaming and tax laws, a five per cent tax on winnings made from gambling, and a seven per cent tax to be charged on bookmakers’ gross betting revenues.
Prize competitions with premium costs of entry will be taxable at 15 percent of the total gross revenue. Real estate and private sector firms were also beneficiaries in this year’s budget.
Stamp duty on the transfer of assets to Real Estate Investment Trusts (REITs) and Asset Backed Securities has been scrapped to encourage more pension money to go towards these asset classes.
“Retirement benefits schemes should be able to diversify their investments into new emerging investment vehicles in the capital markets in order to optimise returns to members,” said Mr Rotich.
Private equity firms also got a boost after the cap on how much pension schemes can invest in new funds was raised.
“I therefore propose to create a new category in the Retirement 33 Benefits Investment guidelines to allow schemes to invest up to 10 per cent of their assets in private equity funds and venture capital funds licensed by the Capital Markets Authority.”
Investment of retirees money in “other asset classes” where private equity and venture capital funds are classified is regulated to safeguard workers’ savings.