Equity misses capital gains tax deadline on Sh2.2bn Housing Finance share sale
Mr James Mwangi, Equity Bank chief executive. PHOTO | FILE |
What you need to know:
Equity Bank may have to pay capital gains tax on the Sh2.2 billion transaction.
Capital gains on property and share transactions became applicable Thursday, which could mean a potentially huge tax bill for the lender.
Equity Bank had applied for approval from the Central Bank of Kenya, the Competition Authority of Kenya and the Capital Markets Authority to allow it sell a 24.7 per cent stake in HF to Britam for about Sh2.2 billion.
Equity Bank’s bid to conclude sale of its 24.7 per cent stake in Housing Finance before year-end has failed following delays in securing regulatory approvals, raising possibility of the bank paying capital gains tax on the Sh2.2 billion transaction.
The lender had earlier this month highlighted the urgency to complete sale of its shares in mortgage firm to Britam before January 1 to avoid incurring the new tax.
Equity Bank had applied for approval from the Central Bank of Kenya, the Competition Authority of Kenya and the Capital Markets Authority to allow it sell a 24.7 per cent stake in HF to Britam for about Sh2.2 billion.
In early December, the bank received the competition watchdog’s approval to go ahead with the transaction, but the lender did not receive consent from the other regulators by the targeted date.
“We’re still waiting for some approvals and we shall update you,” said Britam’s director of marketing and corporate affairs Muthoga Ngera on Wednesday in a telephone interview.
Capital gains on property and share transactions became applicable Thursday, which could mean a potentially huge tax bill for the lender.
The tax has been set at five per cent of the difference between the transfer price less expenses associated with the transaction adjusted for the cost of acquisition. These costs include the price of the property, construction costs, fees and commission of acquiring, and preservation costs.
Equity had in an extraordinary general meeting (EGM) held on November 24 expressed optimism that the sale of 57.27 million ordinary HF shares to Britam was “on course” and could be completed by the cut-off date.
The transaction would see the bank comply with Central Bank regulations discouraging banks from having strong control on other financial institutions that are not subsidiaries.
Equity’s disposal of its shareholding in the mortgage firm is also seen to be driven by new stringent rules that effectively curtailed the lender’s ambitious plans for the mortgage firm.
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