NAIROBI, Kenya — The Office of the Controller of Budget has proposed a series of safeguards to tighten provisions in the Income Tax (Amendment) Bill 2026, targeting potential abuse of capital gains tax (CGT) exemptions during corporate reorganisations.
In submissions made alongside Oxfam Kenya, the Controller of Budget outlined measures aimed at strengthening oversight, enhancing transparency, and preventing tax avoidance schemes that could erode public revenue.
Among the key proposals is the introduction of a financial threshold for qualifying reorganisations. The office recommends that transactions exceeding a prescribed value—such as Sh500 million in asset value—should require an advance tax ruling from the Kenya Revenue Authority before benefiting from CGT exemptions.
The office has also proposed anti-avoidance provisions to ensure that tax relief is not used to mask changes in ownership.
Specifically, it recommends that any property transferred under a reorganisation must either be the same asset or directly traceable to the original holding.
Additionally, the proposals seek to bar eligibility for CGT exemption where a reorganisation results in a change in ultimate beneficial ownership within five years of completion.
Further safeguards target corporate residency and transparency. The Controller of Budget suggests that entities benefiting from reorganisation relief should remain tax-resident in Kenya for at least three years after restructuring.
This, it argues, would prevent companies from exploiting local tax incentives before shifting operations or profits offshore.
The office also calls for the exclusion of arrangements structured through undisclosed trusts or nominee arrangements, unless fully declared to the Kenya Revenue Authority. This proposal aligns with broader global efforts to clamp down on opaque ownership structures often associated with aggressive tax planning.
These recommendations come amid increasing scrutiny of tax policy reforms in Kenya, where lawmakers are balancing the need to attract investment with the imperative to protect the tax base.
The Constitution of Kenya mandates equitable sharing of the tax burden and prudent management of public resources, principles that underpin ongoing fiscal reforms.
