ClearTax Consultancy

ClearTax Consultancy Tax consultants, Business ERPs, company registration in Kenya. We help people and businesses in 3 things:
1. Register the right type of business in Kenya
2.

Save on their taxes
3. Automate their operations through great software. Schedule a call with us here https://calendly.com/cleartax-consultancy/30min

19/05/2026

Finance Bill 2026 has declared war on tax havens.

1. The good (Real Estate)

• If you transfer property into a Real Estate Investment Trust (REIT)
• You will pay ZERO capital gains tax

Even stamp duty is removed.

Meaning:

• Easier and free to move property into investment structures
• Big boost for real estate funds

2. The real move (Non-residents)

KRA has closed a major loophole.

Right now:
• Investors sell their shares in Kenyan companies offshore.
• While the real investment is still in Kenya
• And avoid Kenyan taxes

The bill proposes:

• If shares of the offshore company derive value from Kenyan investment
• OR change ownership of Kenyan property
• OR change group structure of a Kenyan company

KRA will tax the gain.

Even if the deal happens in Mauritius.

Meaning:

• Offshore deals are no longer safe
• KRA is coming for indirect transfers

CGT rate remains: 15%

This is a targeted move that:

• Incentivizes REITs
• But tightens grip on tax haven sales

16/03/2026

KRA has gained another weapon.

One that will make serial nil return filers hesitate before clicking that NIL button.

Last month, this tax dispute left many ears tingling.

There is a restaurant called Avery Lounge.

I have no clue how they mastered it, but they cook the finest fish in Utawala.

Just next to Banta. My friend Kasimu recently took me there.

The place also offers the most spectacular rooftop view of Embakasi.

But there was one small problem.

- Despite all that poshness, Avery Lounge kept filing nil tax returns.

KRA became curious.

So they sent their spies.

The spies returned with a disturbing report:

- Bosi, the place is full. People are eating life like tomorrow has been cancelled.

KRA was enraged.

- How could such a big restaurant keep declaring zero income?

So KRA went straight for their bank accounts.

And what did they find?

- Millions flowing in.

At that point KRA lost its remaining patience.

They demanded for:

- financial statements
- purchase & expense records
- explanations for the deposits

But Avery provided none of them.

KRA became even more dramatic.

- They totaled all the bank deposits for the year.

- Baptized them as income.

- Then applied 30% income tax on the entire amount.

And sent Avery a tax demand of ksh 93 million.

Avery ran to court.

- They argued that some of the deposits were loans.
- And that KRA had not factored in real expenditures like purchases & Wages

But there was a small problem.

- They had no loan agreements.
- No documentation for expenses.
- Nothing.

The court looked at the situation and said:

- Since the taxpayer refused to provide records, KRA had no choice but to treat the bank deposits as income.

And with that, the court told Avery:

- Pay the 93 million tax bill.

Case closed.

So what is the lesson here for you?

If you have money flowing through your bank accounts, and you cannot explain the source,

KRA will simply decide:

- All deposits = income.
- And tax those deposits.

Therefore:

- Be careful with nil returns.
- Keep records. In tax matters, records are king.

03/03/2026

When you own land in ushago,

And that land is:
- Outside a municipality
- Outside a town or urban area
- Classified as agricultural land
- But above 50 acres

When you sell it,

- You pay KRA 15% Capital Gains Tax.

Unless the sales value is below 3M.

Now here is where I see people try to be clever.

- They subdivide the land into portions below 50 acres. Then sell.
- Thinking: each portion is below 50 acres. So no CGT.

But KRA treats this as AGGRESSIVE CONSPIRACY to avoid taxes.

And the consequences are astronomical:

- 15% CGT on the entire original parcel prior to subdivision.
- Plus penalties of double the tax avoided. 200%
- They end up paying 45% CGT.
- Plus interests

That is the real definition of type 3 KRA diabetes.

So what is the smarter approach?

- Look for buyers to come for smaller portions below 50 acres, split and sell only that portion.

You pay zero capital gains tax.

And you will walk away with your money intact.

02/03/2026

If you own land in ushago,

And that land is:
- Outside a municipality
- Outside a town or urban area
- Classified as agricultural land
- And below 50 acres

When you sell it,

- You pay zero Capital Gains Tax.

Regardless of the value.

So, when KRA calls to demand their share,

Explain to them those facts.

And you will walk away with your money intact.

23/02/2026

Back to our series on capital gains tax in Kenya.

You bought land at 1M in 2015.

Then, some random folks on X convinced you that: a car is better than land because it can take you to town while land can't.

So you sold it at 5M in January 2026. To buy an Audi.

- The land has appreciated by 4M.

That 4M is your capital gain.

Capital Gains Tax steps in.

- 15% of the gain.
- Payable to KRA.

But that is not the full story.

Before calculating the 15%,
you are allowed to deduct costs you incurred on that property.

Such as:

- Stamp duty
- Conveyancing fees
- Land rent and rates
- Cost of drilling a borehole
- Cost of fencing
- Even legal fees paid to fight that encroaching neighbor

All these reduce your gain.

After deducting them,
you arrive at your net capital gain.

That is what is taxed at 15%.

Now the real panic question is:

- What if you did not keep receipts?

A very common problem.

- Does it mean you lose the deductions?

No.

You can carry a valuation of the property.

The valuer walks into your land today.

Looks at the fence.
Looks at the borehole.

Then wizardly travels back in time.

And tells KRA:

- This fence would have cost X in 2017.
- This borehole would have cost Y in 2019.

A proper valuation report reconstructs your historical costs.

And KRA accepts it.

So poor record-keeping is a headache.

But it is not a death sentence.

Any questions?

19/02/2026

What happens when you inherit land from your parents?

- Will KRA tax it?

The answer is NO.

Why?

- Because there is no Capital Gains Tax on inheritance in Kenya.

- Inheritance is not a sale.

- It is a transfer by operation of law.

So if KRA sends a tax demand after the transfer,

Do not panic.

After transfer at the land registry,
KRA’s system will fetch that data.

When it finds no corresponding CGT return, a demand letter will be sent to the transferor.

But why demand for tax from inheritance?

- KRA does not know it was inheritance. They can only see property changed hands at land registry's system.

And when property changes hands, KRA normally looks for its share.

What do you need to do?

Respond clearly:

- The property was inherited.
- It was not sold.
- There was no consideration paid.
- Attach the Grant of Letters of Administration or Confirmation of Grant.

Once KRA establishes it was an inheritance,

The tax demand is withdrawn immediately.

Not every transfer is taxable.

Enjoy your inheritance.

Have received such a demand before from KRA? How did it go?

17/02/2026

Freelancers working from home are seeing things right now.

- Landlords have sworn they'd rather be hung than give them eTIMS receipts.

Wanaambiwa wachague eTIMS receipt ama nyumba.

- Yet they still need the receipt to deduct home office.

What is the solution here?

13/02/2026

Will KRA tax me if I freelance for clients wa majuu?

This is the no 1 question all freelancers ask.

Especially those working with foreign clients in the US, UK, Dubai, Australia, et al.

And honestly, it is a justified question when you listen to their arguments.

They argue:

- We are not employed by the Kenyan govt
- We sourced gigs abroad due to joblessness here
- No Kenyan company hires us.
- We do not invoice anyone in Kenya.

In short, they are saying,

- Kenya does not contribute a single cent to our income.
- Nor did Kenya give us that client.

So they wonder,

Would KRA harvest where the Kenyan government did not sow?

Then they hear the answer.

Yes. KRA will tax it.

And many go mad.

But why would KRA tax it?

Because Kenya taxes income on 2 bases:.

1. Source of the income. If your income is sourced from Kenya - Kenyan clients, Kenyan contracts - KRA taxes it. Your clients are abroad. You escaped that one.

2. Where the earner lives. If you earn income while living in Kenya, that income is taxable in Kenya.

So, if you are coding, designing, or consulting while seated at your desk in Mwihoko, Gatharaini, Kilimani or Msokotobenga.

KRA will tax that income.

It does not matter where the client sits.
It does not matter that you are paid in dollars.

- Kenya taxes its residents on their worldwide income.

So even though the Kenyan govt didn't help you get that client, KRA will still tax you for living in Kenya. And for breathing the fresh Kenyan oxygen.

- Think of it as the rent you pay for living in Kenya.

Is it fair?

11/02/2026

What should you choose?

Turn over Tax (TOT) or Ordinary Income Tax?

And what is the difference?

These are the 2 types of the income tax we have in Kenya.

- ToT, taxes your total sales. You do not deduct even a single expense.
- Tax rate = 1.5% of sales.

- Income tax, taxes your profits. Sales minus expenses.
- Tax rate = 30% of profits for companies. And between 10-35% of profits for individuals.

Many small business owners choose TOT because:

- It is simple.
- 1.5% tax is small.

But small compared to what?

Here’s what actually matters.

Turnover Tax (TOT):

- Applies to businesses with turnover between Ksh 1M – 25M
- Does NOT apply to professional or consultancy or rental income

The biggest mistake most people make is:

They focus on the rate.
And ignore their profit margins.

I can explain, with the aid of a diagram.

Example 1:
Monthly sales: 1,000,000
Profit margin: 10%
Profit: 100,000

TOT → 1.5% of 1,000,000 = 15,000
Ordinary income tax → 30% of 100,000 = 30,000

TOT wins hands down.

Now reduce margin to 5%.

Profit: 50,000

TOT → 15,000
Ordinary → 15,000

Break even.

Reduce margin to 3%.

Profit: 30,000

TOT → 15,000
Ordinary → 9,000

Ordinary income tax wins here.

Key takeaway:

- High-margin eligible businesses → TOT makes sense.

- Low-margin businesses → Ordinary income tax makes sense.

In simple terms:

- Your margin decides.
- Your business type decides.

You did not start a business to work for KRA.
You started it to put money in your pocket.

Choose wisely!

09/02/2026

How & when does KRA call for your Bank & M-Pesa Statements?

It is true.

KRA has a new weapon. To tax all unexplained money in your bank and m-pesa.

So, it's important to understand this.

KRA does not wake up and randomly ask for your bank & M-Pesa statements.

They are triggered.

Your data triggers them.
It tells them your tax returns are off.

When they believe your tax return is not honest,
They launch an audit against you.

That is when they demand:

- Your Bank statements
- Your M-Pesa statements

And that is when your explanations are required.

Not stories.
Not vibes.

Documents + clear narrations to prove:

- You did not cheat on your return
- The money seen is not income, but something else

The flow is:

Suspect → Audit → Statements → Explain or pay

If you wait until audit day to start “remembering” what deposits were for,
KRA will remember them for you, with tax, penalties & interest.

Solution.

Do monthly bank / mpesa reconciliations.

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