Capital Gains Tax on Family and Inherited Land in Kenya

No capital gains tax applies when land moves between spouses, to your children, or from an estate to a beneficiary. Gifts to other relatives, such as a brother, are outside the family rule and can be taxed at 15 percent. If you later sell land you received tax free, that sale is normally taxable, and a five-year rule decides what cost you can use. Stamp duty is a separate question.

The rules are in the Eighth and First Schedules to the Income Tax Act. The Finance Act 2026 did not change how these rules apply to family or estate transfers.

Transfers within the family

Paragraph 6(2) of the Eighth Schedule says these are not transfers for capital gains tax:

• Between spouses.
• Between former spouses, as part of a divorce settlement or genuine separation agreement.
• To immediate family, including as part of a divorce or separation agreement.
• To a company where an individual, spouses, or a spouse and immediate family hold 100 percent of the shares.

Who counts as immediate family. Paragraph 6(3) defines it as children of the spouses or former spouses. On that wording, brothers, sisters, parents, nephews and cousins are not included. A gift to one of them is a transfer under paragraph 6(1), and paragraph 9 replaces the price with market value. So you could owe tax on a gain even though no money changed hands.

Grandchildren are not named either. If your plan involves anyone other than a spouse or child, confirm the position with KRA first.

Family trusts. Paragraphs 36(g) and 58 of the First Schedule also exempt gains on transfers of immovable property to a family trust. Paragraph 36(g) refers to a registered family trust, so make sure yours is registered.

Inherited land

Three rules cover an estate:

• Vesting in the personal representative: when the land passes by law to the person administering the estate, there is no transfer (paragraph 6(2)(c)).
• Passing to a beneficiary: a transfer by the personal representative to a beneficiary, including where there is no will, is not a transfer (paragraph 6(2)(d)).
• Sale to administer the estate: a gain is exempt if the sale is completed within two years of death, or a longer period KRA allows in writing. If there is a court case over the estate, the two years run from when it ends (First Schedule, paragraph 36(f)).

Selling the land later

Paragraph 8(4A) of the Eighth Schedule sets the five-year rule. If land reached you in a transaction not subject to capital gains tax, and you sell it in a taxable sale less than five years later, your cost is the original cost from the first transfer.

Example. A father bought land for KES 1,000,000, and gave it to his daughter when it was worth KES 4,000,000. Three years later she sells it for KES 5,000,000. Ignoring other costs, her gain is KES 4,000,000 and the tax is KES 600,000.

After five years, the law is less direct:

• Paragraph 9 deals with property acquired by gift or other than at arm’s length. It uses the lesser of market value when acquired and the value used for stamp duty on that acquisition.
• For inherited land, a Tax Appeals Tribunal decision concerned siblings who inherited land in 2015 and sold it in 2020. KRA treated their cost as zero. Relying on paragraph 9, the Tribunal held that the cost was market value at inheritance. That sale came before the five-year rule. We could not confirm whether the same reading applies to sales after five years, so take advice before you rely on it.

We have read a summary of this decision, not the full text, and it may have been appealed. We did not find KRA guidance on the point. Get a professional valuation around the time you receive the land, and have your adviser confirm your cost before you sell. The normal exemptions for a home, a small farm or land sold for KES 3 million or less may also apply, as our guide to selling land explains.

Stamp duty is separate

A transfer free of capital gains tax can still attract stamp duty. Under the Stamp Duty Act:

Transfer	Stamp duty position
Husband and wife	Nil (Schedule item 12B)
Gift to a child or other relative	Charged like a sale at 2 or 4 percent, using the property’s value (section 52(1))
To a beneficiary from a trustee or other fiduciary	Outside the gift rule (section 52(6))
A will or registered family trust	Exempt instrument (section 117(1)(h))

The Act’s words for a nil transfer are “husband and wife”, so ask about a transfer to a former spouse. For an estate transfer, the general Schedule item for other conveyances is a fixed KES 200, but check what Ardhipay assesses on your transfer. See our stamp duty guide for rates and the payment route.

Before you transfer

• Keep the paper trail. Keep the grant of representation, purchase documents, valuation and stamp duty receipts to prove your cost later.
• Do not use a family transfer to disguise a sale. The anti-avoidance rule added by the Finance Act 2026 (section 18A of the Tax Procedures Act) lets KRA challenge schemes built to get a tax benefit, and section 85 sets a penalty of double the tax avoided.

Our tax team can check your facts before you sign.