Kenya singled out for levying low property tax

Kenya is among the countries singled out on the continent for levying almost non-existent property taxes when compared to gross domestic product (GDP).

A Mo Ibrahim report notes this as one of the gaps existing in developing economies, which has led to stagnation of the growth of to tax-to-GDP ratio.

It compares Africa to other regions such as Latin America and the Caribbean or Asia and the Pacific, saying the continent’s tax-to-GDP ratio is lower. Despite incremental progress over the last decade, from 14.8 per cent in 2012 to 16.0 per cent in 2022, the continent’s average ratio remains at less than half of the Organisation for Economic Co-operation and Development (OECD) average of 34 per cent.

The report documents that while goods and services make up 8.0 per cent, payroll and property taxes contribute the least to public revenue.

The July 2025 report states that in some economies, like Kenya, the property taxes to GDP ratio is almost non-existent at 0.0 per cent.

Poor data on property is one of the reasons why levying this tax has become difficult for governments.

The 2025 Forum Report titled Financing the African we want, notes that the African tax data landscape as a whole remains patchy, and variance in backdating is high.

The lack of this data stems from the informal nature of economies on the continent.

The report explains that the predominance of the informal sector on the continent, as high as over 80 per cent of total employment according to the International Labour Organisation (ILO), also presents an additional challenge.

“In many countries, knowledge of property ownership is limited and census data is out of date, providing an inaccurate picture of working age populations,” the report says.

The report says that while property tax as a share of GDP can reach as high as 2.0 per cent or more in high-income countries, it accounts for only 0.3 per cent in Africa. Additionally, only three countries are above 1.0 per cent as of 2022. These are: Morocco (1.5 per cent), South Africa (1.2 per cent) and Mauritius (1.1 per cent).

“While still playing a marginal role, many countries have increased their property taxes in the last two decades. Still, in countries like Botswana, Equatorial Guinea, Guinea, Kenya, Mauritania and Somalia, the property tax to-GDP ratio remains at null,” the report says.

Properties in Kenya are levied stamp duty, capital gains and value-added tax (VAT), among other taxes.

As Njaga & Co Advocates explains, stamp duty is charged at 4.0 per cent of the property purchase price or market value (whichever is higher) for urban residential units. This figure goes up to 6.0 per cent when handling commercial properties.

For agricultural land, the rate is 2.0 per cent.

There are, however, exemptions and reliefs, where applicable, offered when charging stamp duty. These include: transfers between spouses and family membersfirst-timeme home buyers under the affordable housing program, transfer of land for construction or expansion of educational institutions or transactions involving charitable organisations or public interest entities which may qualify for relief upon application to the Cabinet Secretary for Lands.

For VAT, Njaga & Co Advocates explains that residential land and buildings are generally exempted, while commercial buildings and properties are subject to 16 per cent.

“VAT may also apply to additional charges related to the property purchase, such as legal fees payable to the vendor’s advocate, handling charges for financial purchases, and transfer or allotment of shares in property management companies,” the law firm explains in an article published on its website.

Capital gains tax (CGT) is applied at 15 per cent of the net gain. This is the difference between the sale price and the original price of the unit. It is paid by the seller on any profit made from the sale of the property.

“While the buyer does not pay CGT directly, it affects the overall transaction costs and pricing,” the law firm adds in the April 2025 article.

There are also land rates which differ among counties, valuatiofeesee and title deed processing.

The Mo Ibrahim report says technology, such as electronic payments, has proved to be useful when governments want to collect more from this sector.

“Electronic payment systems and automated billing in Arusha, Tanzania significantly improved property tax collection, doubling revenue within three months of implementation,” the report says.

It adds that satellite imagery for tax mapping has significantly improved property tax systems in low-income African countries. It cites Freetown, Sierra Leone, which identified more than 50,000 unregistered properties, boosting tax compliance and revenue.

The report also lists Rwanda, citing it as unique in Africa for having a fully digital nationwide land registry and cadastre, a change driven by the need to resolve land conflicts that contributed to the 1994 genocide.

“The country implemented a comprehensive legal reform that included strengthening women's land rights. Rwanda granted land titles for every parcel between 2011 and 2013, which had several benefits, such as 86 per cent of land ownership documents including women,” the report says. “This led to a more vibrant land and mortgage market and more investment in soil protection.”