Kenya: Finance Act, 2026 Introduces Tax Exemptions for Transfers of Property into Real Estate Investment Trusts (REITs)
Authored by: Alex Njage, Alex Mathini, Lavine Atieno – Bowmans Law
At a glance
On 23 June 2026, the President assented into law the Finance Act, 2026 (the Finance Act). The Finance Act introduces a number of amendments to Kenya’s tax legislation, including changes that are expected to have a significant impact on the real estate investment trust (REIT) sector.
Among the notable amendments are the introduction of exemptions from capital gains tax (CGT) and stamp duty with respect to transfers of property into REIT structures. These changes are welcome as they address long-standing tax inefficiencies that have historically increased the cost of establishing and scaling REIT structures.
It is worth noting that the CGT and stamp duty exemptions apply broadly to transfers of both real property and shares in SPVs holding the underlying property, where the transfer is made into a REIT.
We highlight below the key amendments and their implications for the Kenyan real estate sector.
The Amendments
Capital Gains Tax Exemption
The Finance Act has amended the First Schedule to the Income Tax Act by introducing Paragraph 76 which provides for the exemption from CGT of any capital gains arising from the transfer of property to a REIT registered by the Commissioner (Kenya Revenue Authority). This amendment takes effect from 1 July 2026.
Commentary: Prior to this amendment, CGT at the rate of 15% was payable by a transferor of property into a REIT on any gains arising therefrom. The CGT cost was a significant barrier to property owners seeking to transfer property into REIT structures. The exemption eliminates this tax cost and makes it more tax efficient for property owners to transfer assets into REITs. Importantly, the CGT exemption applies to transfers of property to a REIT registered by the Commissioner, and not to transfers to an investee company of a REIT. The CGT exemption on the transfer of property will be applied for by the transferor on iTax.
Notably, in light of this exemption from CGT, the issue of tracking or rebasing the cost base of property transferred into a REIT for future CGT purposes does not arise. This is because a REIT and its investee company/companies which are registered with the Commissioner (KRA) are themselves exempt from income tax (which includes CGT) pursuant to section 20 of the Income Tax Act. Accordingly, no CGT would be payable by the REIT or its investee company on a future disposal of property, eliminating the issue of cost base.
Stamp Duty Exemption
The Finance Act has also amended section 96A of the Stamp Duty Act to exempt from stamp duty instruments conveying or transferring a beneficial interest in property to a REIT authorized under the Capital Markets Act. This amendment also takes effect from 1 July 2026.
Commentary: The amendment broadens the scope of the existing stamp duty exemption framework in relation to REITs by extending the exemption to transfers of beneficial interests in property from a person or persons into a REIT. This complements the CGT exemption and, together, the two exemptions significantly reduce the transaction costs associated with transferring property into a REIT. Given the value of assets typically transferred into REIT structures, stamp duty has historically represented a material cost in the establishment and transfer of property into REITs. Notably, value added tax exemptions have long existed for the transfer of assets into REITs. Accordingly, the only tax that may be applicable on a transfer of property into a REIT is income tax with respect to buildings on which investment allowances have been claimed. This could however be mitigated through appropriate transaction structuring, such as transferring shares in the SPVs holding the buildings to the REIT instead of the buildings themselves, as such a transfer of shares to a REIT would qualify for exemption from both CGT and stamp duty.
An application for stamp duty exemption must be submitted to the Collector of Stamp Duties in writing for approval.
Why This Matters
The introduction of the CGT and stamp duty exemptions represents one of the most significant tax developments for Kenya’s REIT sector in recent years. Although Kenya established a legal framework for REITs over a decade ago, uptake has remained low, with the tax cost associated with transferring real estate assets into REIT structures cited as one of the key challenges.
By removing the CGT and stamp duty costs associated with transfers of property into REITs, the amendments are expected to enhance the attractiveness and commercial viability of REIT structures. The reforms may support the revival of previously abandoned transactions, create opportunities to revisit investments that were once considered unfeasible due to transfer taxes, encourage the establishment of new REIT structures, and contribute to the growth of Kenya's capital markets.