Capital Gains Tax Due at Transaction Date, Not Registration

Case Study: Haria v Commissioner of Domestic Taxes (Income Tax Appeal E171 of 2024) [2025] KEHC 11504 (KLR) (Commercial and Tax) (1 August 2025) (Judgment)

Background

• Rupen Mulchand Haria, transferred shares in Harleys Limited to Westlands Heights Limited on30th December 2022.
• The share transfer agreement was executed on29th December 2022, and Rupen paid CGT at the then-applicable rate of 5% on 30th December 2022.
• The transfer documents were stamped by the lands registry on 4th January 2023, after the CGT rate increased to 15% (effective 1st January 2023).

KRA’s Assessment:

• KRA issued an additional assessment demanding Kshs. 416,966,484, arguing that since the transfer was stamped in 2023, the higher 15% rate applied.
• KRA also alleged under-declaration of the consideration for the shares.

Tax Appeals Tribunal Decision:

• The Tribunal upheld  KRA’s assessment, ruling that the tax point was the date of registration (stamping) of the transfer (4th January 2023), not the date of the transaction (30th December 2022).

High Court Decision

Tax Point for CGT:

• The court held that under Paragraph 6(1)(a) of the Eighth Schedule to the Income Tax Act, a transfer occurs when property is “sold, exchanged, conveyed, or otherwise disposed of.”
• Since the shares were sold and paid for on 30th December 2022, that was the tax point, not the later administrative stamping date.
• The Tribunal erred by importing principles from the Land Registration Act instead of applying the clear definition under tax law.

Applicable CGT Rate:

• Since the transaction was completed in 2022, the 5% rate applied.
• Applying the15% rate retrospectively would be unlawful and violate the principle that tax laws should not operate retroactively.

Final Orders:

• The Tribunal’s judgment was set aside.
• The tax point was confirmed as 30th December 2022.
• The applicable CGT rate was 5%, not 15%.
• KRA’s additional assessment of Kshs. 416,966,484 was quashed..

Significance of the Judgment:

• Clarity on Tax Point: The case reaffirms that the tax point for CGT is the date of sale/disposal, not administrative steps like stamping or registration.
• No Retrospective Taxation: Tax rates applicable at the time of the transaction apply, not those introduced later.

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