New battle looms between Kenya Revenue Authority and stockbrokers

NAIROBI: A new battle is brewing between Kenya Revenue Authority (KRA) and the stock brokerage fraternity. This follows a notice by the taxman that brokers continue remitting capital gains tax on sale of securities until a new levy introduced in this year's budget kicks in next year.

 

"The rate of capital gains tax chargeable on sale of listed securities as per the current law is 5 per cent of the net gain. This tax, which is collected and accounted for by stockbrokers on behalf of their clients, is due upon transfer of securities but not later than the 20th of the month following that in which the transfer was made," KRA said in a public notice issued yesterday. The revenue authority has also stated that stockbrokers will be responsible for remitting the newly introduced 0.3 per cent withholding tax when an investor sells shares at the Nairobi Securities Exchange (NSE).

This new transaction levy, introduced to replace the capital gains tax of 5 per cent on the net gain of such sales, will become effective January 1, 2016.

"Stockbrokers will still be responsible for withholding and remitting this tax to the commissioner of domestic taxes," KRA said. While NSE states that collecting this levy and billing the client will not be an issue, it is, however, seeking for a waiver in the capital gains tax, which is still in force until December 2015.

HAVING DISCUSSIONS

"We are still having discussions between individual stockbrokers and the KRA on whether a waiver can be considered in this intervening period between now and end of the year," NSE Chief Executive Officer George Odundo said.

"It is still difficult for stockbrokers to collect the Capital Gains Tax because brokers do not have information on what price a particular share being transferred was bought at or even costs incurred before its eventual sale," he added.

Nairobi Securities Exchange has also insisted that there are areas to be clarified and agreed upon first before the transaction levy can become effective.

In the notice, KRA has said capital gains tax for the transfer of real estate remains at 5 per cent of the net gain made on such transfers to be accounted for by the owner of these shares.