Capital Gains Tax (CGT) becomes due when the shares are sold and paid for, not when the transaction is later stamped

The case ( Haria v Commissioner of Domestic Taxes [2025] KEHC 11504 (KLR)) arose from a dispute over Capital Gains Tax (CGT) following the transfer of shares by Rupen Mulchand Haria (Appellant) in December 2022. Haria transferred his shares in Harleys Limited to Westland’s Heights Limited on 30th December 2022, applying the then-prevailing 5% CGT rate. The transfer agreement was stamped at the Lands Registry on 4th January 2023, after the new 15% CGT rate had taken effect.

The Kenya Revenue Authority (KRA) issued an additional assessment of Kshs. 416,966,484, arguing that the higher 15% rate applied since the stamping occurred in 2023. Haria challenged the assessment, but the Tax Appeals Tribunal upheld KRA’s position. Dissatisfied, he appealed to the High Court.

The High Court (PJO Otieno, J) considered three issues as follows. First what was the correct tax point for CGT on share transfers?. Secondly what was the applicable CGT rate. Finally the Constitutionality of Section 56 of the Tax Procedures Act (burden of proof on taxpayers)?

The Court held that the tax point was 30th December 2022, when the shares were sold and paid for, not the later stamping date. Thus, the applicable CGT rate was 5%, not 15%. The Court quashed the KRA’s additional assessment, finding it amounted to an unlawful retrospective application of tax law.

On the constitutional issue, the Court upheld Section 56 of the (Tax Procedures Act)TPA, ruling that the burden of proof provision applies in civil tax disputes and does not infringe the constitutional presumption of innocence, which is limited to criminal proceedings. The court  futher held that section 56 of the Tax Procedures Act as mirrored in Section 30 the Tax Appeals Tribunal Act created not a new law nor standard but merely reiterates the ever-present principle of the Law of Evidence that the onus rests upon he who alleges to prove the allegations.

The appeal was allowed. The Tribunal’s decision was set aside, the KRA’s assessment was quashed, and costs were awarded to the taxpayer.

The High Court resolved a dispute over the applicable Capital Gains Tax (CGT) rate on a December 2022 share transfer. The taxpayer, Rupen Mulchand Haria, sold his shares and self-assessed CGT at 5%, the prevailing rate at the time, but the Kenya Revenue Authority issued an additional assessment of Kshs. 416,966,484 applying the 15% rate that took effect on 1 January 2023, arguing that tax was due upon stamping of the transfer in January. The Court held that the tax point was the actual transfer dated 30 December 2022—when the shares were sold and paid for, and that applying the higher rate retrospectively was unlawful. It further upheld the constitutionality of Section 56 of the Tax Procedures Act, confirming that the burden of proof rests on taxpayers in civil tax disputes. The appeal was allowed, the Tribunal’s decision and KRA’s additional assessment were quashed, and costs awarded to the taxpayer.