The Income Tax (Amendment) Bill, 2026
Status Timeline
Proposed
Done ยท 15 Sep 2026
Public Review
Done
Debate
Done
Executive
Done
Enacted
Active now
Exclusion from Deemed Taxable Distributions
Amends Section 7(1) of the Income Tax Act to state that a transfer of property by a company to its shareholders during an internal reorganisation is not deemed a distribution for tax purposes.
Capital Gains Tax Exemption for Restructures
Amends the Eighth Schedule to exempt property transfers during internal reorganisations from capital gains tax. This includes transfers from a company to its shareholders and vice versa as consideration.
Proportionality and Subsidiary Share Rules
Establishes qualifying conditions for the exemptions:
- Property must be transferred in proportion to shareholders' existing holdings immediately before the transfer.
- Transferred shares must relate directly to a subsidiary of the transferring company.
Bill No.
National Assembly Bills No. 20
Gazette No.
Kenya Gazette Supplement No. 100
Sponsor
Kimani Kuria
Background
The principal object of the Income Tax (Amendment) Bill, 2026 is to provide for the exemption of capital gains tax in the transfer of property by a company to its shareholders as part of an internal reorganisation, or on the transfer of property to the company by the shareholders as consideration for the transfer.
Key Amendments
Exclusion from Deemed Distribution (Section 7)
The Bill proposes to amend Section 7(1) of the Income Tax Act (Cap. 470) by introducing a new paragraph (c). Under this provision, a transfer of property by a company to its shareholders under paragraph 6(2)(i) of the Eighth Schedule shall not be deemed a distribution for the purposes of the Act.
Capital Gains Tax Exemption (Eighth Schedule)
The Bill amends item 6 of the Eighth Schedule to the principal Act by inserting a new subparagraph (i) immediately after subparagraph (2)(h). This allows the transfer of property by a company to its shareholders as part of an internal reorganisation, or the transfer of property to the company by shareholders as consideration, to occur without attracting capital gains tax.
Defining "Internal Reorganisation"
A new subparagraph (2A) is added to the Eighth Schedule, defining "internal reorganisation" as a restructuring of the ownership or control of a company or its assets which does not involve a transfer of property to a third party.
New Obligations
To qualify for the exemptions, transactions must adhere to strict structural constraints:
- Proportionality: Property must be transferred to the shareholders in exact proportion to their shareholding in the company immediately before the transfer.
- Subsidiary Limitation: If the property transferred consists of shares, those shares must relate to a subsidiary of the company undertaking the transfer.
Gazettement
The Income Tax (Amendment) Bill, 2026 was published in the Kenya Gazette No. 100 on April 2, 2026.
First Reading
The Bill was read a First Time in the National Assembly on April 16, 2026.
Second Reading
The Bill was read a Second Time in the National Assembly and debated on April 28, 2026.
Committee of the Whole House
The Bill was considered clause-by-clause in the Committee of the Whole House on April 28, 2026.
Third Reading
The Bill was read a Third Time and passed by the National Assembly on April 28, 2026.
Presidential Assent
The Bill was signed into law by the President on May 11, 2026.