Understanding tax on stocks is important for anyone investing in shares, whether through the Nairobi Securities Exchange (NSE), a private company or an international stock trading platform. Investors may earn money through dividends, sell shares at a profit or hold investments in foreign companies. Each type of investment income can have a different tax treatment under Kenyan law.

For Kenyan investors, tax on stocks is not one single tax charged every time shares are bought or sold. The treatment depends on the type of income, the market where the shares are traded, the investor’s tax residence and the nature of the transaction.

For example, dividends from a Kenyan company generally attract withholding tax, while gains from selling securities traded on a securities exchange licensed by the Capital Markets Authority (CMA) are exempt from Kenyan capital gains tax. Other qualifying share disposals may attract capital gains tax at 15% of the net gain.

Foreign stocks introduce additional considerations because the country where the company is based may deduct tax before paying dividends or impose its own rules on investment gains.

This guide explains tax on stocks in Kenya for 2026, including dividends, capital gains, NSE investments, foreign shares and the records investors should keep.

What Is Tax on Stocks in Kenya?

Tax on stocks refers to the taxes that may apply when an individual or company earns income from owning or selling shares.

There are three main areas investors should understand:

Dividend withholding tax: This is tax deducted when a company distributes part of its profits to shareholders.

Capital gains tax: This may apply when an investor sells qualifying shares or other property for more than the adjusted acquisition cost.

Foreign investment taxation: This concerns dividends and gains from shares in companies outside Kenya. The tax treatment depends on the source of income, the investor’s circumstances and the laws of the relevant foreign country.

These taxes do not necessarily apply to every investor or every transaction. Some share disposals are specifically exempt, while some dividend payments attract final withholding tax.

Understanding the difference helps investors calculate their actual returns instead of assuming that all profits from shares are taxed in the same way.

Tax on Stocks in Kenya: Dividend Withholding Tax

Dividends are payments made by a company to shareholders from its distributable profits. They may be paid in cash or in another form permitted by the company’s distribution arrangements.

When a Kenyan company pays dividends, it generally deducts withholding tax before paying the shareholder.

For 2026, the commonly applicable Kenyan dividend withholding tax rates are:

Shareholder or recipient	General withholding tax rate
Kenyan resident individual	5%
Kenyan resident company holding at least 12.5% of voting power in the paying company	Exempt, subject to statutory conditions
Non-resident shareholder	15%
Non-resident eligible for a lower double tax agreement rate	Treaty rate may apply

The applicable rate depends on the recipient’s status and any relevant exemption or double taxation agreement. The Finance Act 2026 also removed the previous preferential 5% dividend withholding tax rate for citizens of East African Community partner states who are treated as non-residents. The standard non-resident rate is now 15%, subject to applicable treaty relief.Withholding-taxes

Example: Tax on Dividends Received in Kenya

Suppose a Kenyan resident individual owns shares in a company that declares a dividend of KSh 40,000.

The withholding tax calculation is:

Gross dividend: KSh 40,000
Dividend withholding tax rate: 5%
Tax deducted: KSh 2,000
Net dividend received: KSh 38,000

The shareholder receives KSh 38,000 after the tax deduction.

For qualifying dividends received by a resident individual, withholding tax is generally a final tax. This means the dividend is not normally subjected to an additional income tax charge after the final withholding tax has been deducted.

Investors should keep dividend statements and withholding tax certificates as evidence of the amount received and tax deducted.

Is Tax on Stocks Charged When You Sell NSE Shares?

One of the most important considerations for Kenyan investors is the treatment of shares listed on the Nairobi Securities Exchange.

Under the Income Tax Act, gains arising from the transfer of securities traded on a securities exchange licensed by the Capital Markets Authority are not chargeable to capital gains tax under the relevant provision.

This means that an investor who sells qualifying NSE-listed shares at a profit generally does not pay Kenyan CGT on that gain.

For example, assume an investor buys shares listed on the NSE for KSh 100,000 and later sells them for KSh 150,000.

The investment has generated a gain of KSh 50,000 before transaction costs. However, where the shares qualify under the listed-securities exemption, the gain is not subject to Kenyan CGT.

This exemption is important when comparing tax on stocks with the tax treatment of private company shares and other investments.

Investors should confirm that the security and transaction fall within the statutory exemption. A share being described as an investment or being available through a trading platform does not automatically mean it qualifies.

Capital Gains Tax on Unlisted Shares in Kenya

Shares in private companies are not necessarily covered by the exemption for securities traded on a CMA-licensed securities exchange.

Where a disposal of unlisted shares falls within the Kenyan capital gains tax rules and no exemption applies, CGT is generally charged at 15% of the net gain.

The net gain is calculated using the transfer value and adjusted acquisition cost.

The general calculation is:

Net gain = Transfer value – Incidental transfer costs – Adjusted acquisition cost

The adjusted acquisition cost may include the original purchase cost, qualifying incidental acquisition expenses and enhancement costs where permitted.

Example: Tax on Selling Private Company Shares

Assume an investor purchases shares in a private company for KSh 500,000 and later sells them for KSh 800,000.

For this simplified example:

Selling price: KSh 800,000
Original purchase cost: KSh 500,000
Allowable incidental costs: KSh 0
Net gain: KSh 300,000
CGT rate: 15%

The capital gains tax is:

KSh 300,000 × 15% = KSh 45,000.

The investor would therefore have a CGT liability of KSh 45,000, assuming the disposal is taxable and no exemption applies.

This example illustrates why investors should distinguish between listed securities and private company shares when assessing tax on stocks in Kenya.

For a more detailed explanation of the computation, read our guide to Capital Gains Tax in Kenya.

How to Calculate Capital Gains Tax on Shares

Where a share disposal is subject to CGT, the investor should establish the transfer value and adjusted cost before calculating the tax.

The process generally involves:

Establish the selling price: Identify the amount received or receivable for transferring the shares.

Confirm the acquisition cost: Use the original purchase documents to establish how much was paid for the investment.

Identify allowable expenses: Include qualifying incidental acquisition and transfer costs, as well as permitted enhancement costs.

Calculate the net gain: Deduct the adjusted acquisition cost and allowable transfer costs from the transfer value.

Apply the CGT rate: Where the disposal is taxable, apply the applicable 15% rate to the net gain.

For example, an investor who sells qualifying unlisted shares for KSh 1,200,000 after purchasing them for KSh 900,000 has a preliminary gain of KSh 300,000 before allowable costs.

At 15%, the preliminary CGT would be KSh 45,000.

The actual amount must be confirmed using the relevant transaction documents and statutory rules.

Tax on Foreign Stocks for Kenyan Investors

Many Kenyan investors now buy shares in international companies through online brokerage platforms. These may include companies listed in the United States, the United Kingdom and other international markets.

Examples include shares in technology, banking, manufacturing, healthcare and consumer goods companies.

However, tax on stocks purchased through a foreign trading platform requires more than looking at the platform’s country of operation.

Kenya generally applies a source-based income tax system. This means that income is generally taxable in Kenya where it accrues in or is derived from Kenya, subject to statutory exceptions.

KRA explains that foreign income is generally not taxable in Kenya merely because the recipient is a Kenyan taxpayer. Specific exceptions apply, including certain foreign employment income and business income earned partly in Kenya and partly outside Kenya. helping-taxation-of-foreign-income

Are Dividends from Foreign Stocks Taxable in Kenya?

Dividends paid by a foreign company are generally foreign-source income. For an individual Kenyan investor, they are not automatically subject to Kenyan income tax simply because the investor lives in Kenya.

However, the foreign country may deduct withholding tax before paying the dividend.

For example, an investor who owns shares in a foreign company may receive a dividend after the source country has deducted its applicable withholding tax.

The final amount received may therefore be lower than the gross dividend declared by the company.

The investor should check:

The country where the company is incorporated.
The applicable dividend withholding tax rate.
Whether a tax treaty applies.
Whether the investor qualifies for treaty relief.
Whether the investment is held personally or through a company.

A Kenyan company receiving foreign dividends may have a different tax treatment depending on its ownership interest, the source of the income and applicable exemptions. It should not automatically use the rules that apply to an individual investor.

Are Profits from Selling Foreign Stocks Taxable in Kenya?

The Kenyan tax treatment of gains from selling foreign shares depends on the source and nature of the asset and the circumstances of the transaction.

Kenya’s CGT rules include specific provisions covering certain foreign entities that derive more than 20% of their value directly or indirectly from immovable property in Kenya. They also cover certain disposals by non-residents holding more than 20% of the share capital of a Kenyan company.

These provisions mean that not every foreign share disposal should be treated in the same way.

A Kenyan resident individual selling ordinary shares in a foreign company will need to consider the source-based tax rules and whether any specific Kenyan provision applies. The country where the shares are listed may also impose its own tax obligations.

Investors should not assume that the Kenyan exemption for securities traded on a CMA-licensed exchange automatically applies to every foreign stock exchange.

For cross-border investments, professional advice can help establish the correct tax position before filing or reporting a transaction.

Double Taxation and Foreign Dividend Income

Double taxation can occur when two countries impose tax on the same income.

For example, a foreign company may deduct withholding tax before paying a dividend to an investor. The investor’s country of residence may also have rules that tax the same income.

Kenya has double taxation agreements with several countries. These agreements determine which country has taxing rights and how qualifying taxpayers may obtain relief.

The treatment depends on the specific treaty, the type of income and the investor’s eligibility.

Investors should not assume that every foreign tax deduction can automatically be claimed as a credit in Kenya. The income must first be taxable in Kenya and the relevant domestic rules or treaty provisions must permit relief.

KRA provides guidance on foreign income and double taxation.

Tax on Stocks for Companies Investing in Shares

Companies may also invest in shares as part of their investment or treasury activities.

The tax treatment depends on whether the company receives dividends, sells shares or holds an interest in another company.

For example, dividends received by a Kenyan resident company from another company in which it holds at least 12.5% of the voting power may qualify for an exemption, subject to the relevant statutory conditions.

Companies should also distinguish between:

Dividends received from local subsidiaries.
Dividends received from foreign subsidiaries.
Gains from disposing of listed securities.
Gains from disposing of private company shares.
Shares held as long-term investments.
Securities held as part of a trading business.

Where share transactions form part of a business’s ordinary trading activities, the income tax treatment may differ from the treatment of a capital investment.

Companies should therefore review the purpose of the investment, ownership structure and transaction history before determining the correct tax treatment.

What Records Should Investors Keep?

Good record keeping helps investors establish the cost of their shares, the amount received when selling them and any tax deducted from dividends.

Investors should retain:

Share purchase confirmations.
Broker contract notes.
Sale transaction statements.
Dividend statements.
Withholding tax certificates.
Bank and payment records.
Brokerage and transaction fee records.
Foreign tax deduction statements.
Exchange rate records for foreign transactions.
Company ownership documents where relevant.

For foreign investments, records should clearly show the currency, transaction date, gross dividend, tax deducted and net amount received.

These records are useful when reviewing investment returns, preparing tax computations and responding to questions from tax authorities.

Common Mistakes When Handling Tax on Stocks

Investors can make costly mistakes when they do not understand the differences between dividend tax, capital gains tax and foreign investment income.

Assuming all share sales attract CGT: Gains from qualifying securities traded on a CMA-licensed exchange are exempt from Kenyan CGT. Other share disposals may have different treatment.

Confusing dividends with capital gains: Dividends are distributions of company profits, while capital gains arise when an asset is disposed of at a gain. The two have different tax rules.

Applying the wrong dividend rate: The applicable withholding tax rate depends on the shareholder’s residence, ownership status and any relevant treaty or exemption.

Assuming foreign dividends are automatically taxable in Kenya: Kenya generally follows a source-based tax system, subject to statutory exceptions.

Ignoring foreign withholding tax: Foreign brokers and companies may deduct tax before paying dividends. Investors should keep evidence of these deductions.

Failing to keep transaction records: Without purchase and sale records, it can be difficult to establish the cost of an investment or calculate a taxable gain.

Treating every investment as a personal investment: Where shares are held through a company or traded as part of a business, the tax treatment may be different.

Understanding tax on stocks before making an investment decision helps investors avoid relying on assumptions that may not apply to their circumstances.

How Adamjee Auditors Can Help With Investment Tax Compliance

Investment income can involve several tax rules, particularly where an investor holds shares in different companies or across multiple countries.

Adamjee Auditors can assist individuals and businesses with reviewing investment-related tax obligations, assessing dividend income, checking capital gains computations, reviewing supporting documents and understanding the relevant Kenyan tax provisions.

Professional support is especially useful for companies holding shares in subsidiaries, investors disposing of private company shares and businesses with cross-border investment arrangements.

If you are unsure about the tax on stocks in your investment portfolio, obtain a tax review before finalising your tax position. Correct classification and proper documentation can help reduce compliance risks and support accurate financial reporting.

Frequently Asked Questions About Tax on Stocks in Kenya

Is tax charged on stocks in Kenya?

Tax may apply to dividends and gains from selling shares, depending on the investment and applicable tax rules. Qualifying gains from securities traded on a CMA-licensed securities exchange are exempt from Kenyan CGT.

What is the dividend tax rate in Kenya?

The general dividend withholding tax rate for a Kenyan resident individual is 5%. The general non-resident rate is 15%, although a lower rate may apply under an eligible double taxation agreement.

Do I pay capital gains tax when selling NSE shares?

Gains from securities traded on a securities exchange licensed by the Capital Markets Authority are exempt from Kenyan capital gains tax under the relevant Income Tax Act provision.

What is the capital gains tax rate on unlisted shares in Kenya?

Where the disposal of unlisted shares is subject to Kenyan CGT and no exemption applies, the general rate is 15% of the net gain.

Are dividends from foreign stocks taxable in Kenya?

Dividends from foreign companies are generally foreign-source income and are not automatically taxable in Kenya for an individual investor. However, foreign withholding tax and specific Kenyan statutory exceptions should be considered.

Are profits from selling US stocks taxable in Kenya?

The Kenyan tax treatment depends on the source and nature of the gain and the investor’s circumstances. Kenya’s source-based system and specific CGT provisions should be considered, alongside any tax obligations in the country where the shares are traded.

Can I claim foreign withholding tax in Kenya?

Foreign tax relief may be available where the income is taxable in Kenya and the relevant domestic provisions or double taxation agreement permit it. It is not automatic for every foreign tax deduction.

Is dividend withholding tax a final tax in Kenya?

For qualifying dividend payments to resident individuals, withholding tax is generally final. The treatment of other recipients and dividend arrangements may differ.

Do companies pay tax on dividends received from subsidiaries?

A Kenyan resident company may qualify for an exemption on dividends received from another company where it holds at least 12.5% of the voting power, subject to statutory conditions.

What documents should I keep for stock investments?

Keep purchase and sale confirmations, broker statements, dividend advice, withholding tax certificates, bank records and foreign tax statements. These records help establish the cost of investments and support tax compliance.

Disclaimer: This article provides general information on Kenyan investment taxation and is not personalised tax or investment advice. The tax treatment of shares depends on the investor’s residence, ownership structure, source of income, market and applicable legislation. Confirm the relevant rules before making a tax filing or investment decision.

Tax on Stocks in Kenya: Dividends, Capital Gains and Foreign Stocks