Did you know that the Finance Act, 2026 has retained important exemptions under the First Schedule to the Income Tax Act?
Two areas stand out: benefits arising due to death, and capital gains on the transfer of property to a registered Real Estate Investment Trust (REIT).
1. Benefits Arising Due to Death
The Finance Act retains the exemption for benefits arising due to death. This provides greater certainty on the tax treatment of qualifying death-related benefits and helps reduce the tax burden on beneficiaries and estates at an already difficult time.
In simple terms, where a benefit qualifies as a benefit arising due to death, the Act provides an income tax exemption.
2. Capital Gains on Transfer of Property to a Registered REIT
A Real Estate Investment Trust (REIT) is an investment structure through which people can pool resources and invest in real estate.
Property might be transferred to a REIT for investment or restructuring purposes—for example, to place property within a regulated real estate investment structure.
Suppose you own a property bought for KSh 50 million and its value has increased to KSh 80 million. The KSh 30 million increase represents a capital gain. If the property is transferred to a qualifying REIT, the transfer would ordinarily raise the question of Capital Gains Tax.
The Finance Act, 2026 provides an exemption for capital gains relating to the transfer of property to a REIT registered by the Commissioner under Section 20(1).
Important Condition
This is not a blanket exemption for every property transfer. The REIT must be registered by the Commissioner under Section 20(1), and the particular property transfer must qualify for the exemption.
The exemption applies to the capital gain arising from the qualifying transfer of property to the registered REIT. It does not mean that all income earned by a REIT is automatically exempt from tax, nor does it mean property should be transferred to a REIT simply because of the tax exemption.
The REIT structure must first make commercial and investment sense for the property owner.
Tax Home Kenya Tip
Whenever you see the word “exempt” in tax law, do not stop there. Ask:
- What exactly is exempt?
- Who qualifies?
- What conditions must be met?
- What transaction is covered?
- What documentation is required?
Finance Act, 2026 | First Schedule to the Income Tax Act
The Act retained these provisions relating to death benefits and qualifying transfers of property to registered REITs.
Tax is not just about knowing the rate. It is about understanding the transaction.
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