Hi,

Many of us confuse investing and trading and this misinformation is regularly proper-gated on this and many other forums.

Trading is the buying and selling of anything for an profit in the short term. This includes buying a large plot and then subdividing it for sale in smaller units. The purchase of a flat off plan and then selling it on completion.

KRA has finally decided to clamp down on these traders who claim that their profit (taxable) from such activities are capital gains (non-taxable) see note below.


ISSUE OF THE MONTH

Point at issue
Under what circumstances and tax regime are property transactions taxable?

Ruling
Property transactions like other commercial activities are taxable whenever they present the form of structured business operations with a profit/ return motive. This implies that where a person engages in property dealings as a business for profit making purposes, then the gains from such activities will be taxable. In this context therefore, persons who develop and sell property or those who purchase and sell for profit are required to declare the income from these activities as business income. The same applies to persons who purchase property for investment purposes with the intention of subsequent resale. The KRA will publish a comprehensive guideline on this matter in the near future besides mounting public education for critical players.



Have a tax compliant week/month!