Tax experts have called for the rejection of a planned new tax on transfer of family estates on the grounds that it will encourage Kenyans to register family trusts outside the country.
Stakeholders giving their views on the Finance Bill, 2024 which seeks to remove the tax exemption of capital gains relating to the transfer of title of immovable property to a family trust, want the proposal deleted.
The Bill proposes to remove the tax exemption of capital gains relating to the transfer of title of immovable property. Currently, the income and principal sum of a registered family trust is exempt from income tax.
PKF Taxation Limited Services has called on the lawmakers to entirely delete the proposal saying family transfers are not commercial transactions and hence should not be subjected to tax.
In its memorandum to the committee, PKF termed the proposal as detrimental as it will discourage Kenyans from establishing registered family trusts that are beneficial for succession planning. “This may also encourage Kenyans to register family trusts outside Kenya, especially in low tax jurisdictions,” the firm says in its memorandum.
The Institute of Certified Public Accountants of Kenya (ICPAK) has also opposed the proposal arguing that the transfer of titles of immovable property to a family trust is not a capital gain since the beneficial ownership does not change.
Another firm Bowmans said in its memorandum that this will be a major setback, especially in the real estate in the country.
“A key reason as to why registered family trusts have become quite popular is due to the tax exemptions such as making the income of a registered family trust exempt from income tax,” the firm says in its memorandum to the committee.
