Antonio
Antonio Personal coach

Investment option using 100,000 KES

Investment option using 100,000 KES

Investing can be a great way to grow your wealth over time, but it’s important to understand the tax implications of your investments.

In Kenya, the tax rules vary depending on the type of investment and your income level. Here’s what you need to know:

Exchange-Traded Funds (ETFs):

If you invest 100,000 KES in an ETF and it appreciates in value by 10% in one year, your investment would be worth 110,000 KES. If you decide to sell your ETF at this point, you would owe 5% capital gains tax (CGT) on the profit, which would be 500 KES. If you hold the ETF for three years or more, you would qualify for a reduced CGT rate of 0%, which means you would owe no taxes on the profits when you sell.

Mutual Funds:

Investing 100,000 KES in a mutual fund and seeing a 10% return in one year would result in a value of 110,000 KES. If the mutual fund distributed a dividend of 5,000 KES during the year, you would owe 5% withholding tax on the dividend, which would be 250 KES. When you sell the mutual fund, you would owe CGT on any profits at the same rate as ETFs.

Robo-Advisors:

Investing 100,000 KES through a robo-advisor would follow the same tax rules as other investments. If your investment returns 10% in one year and you decide to sell, you would owe CGT at the same rates as ETFs and mutual funds.

Individual Stocks:

Investing 100,000 KES in individual stocks can be more complex from a tax perspective. If you see a 10% return on your investment in one year and decide to sell, you would owe CGT at the same rates as ETFs and mutual funds. Dividends paid by the stocks would also be subject to withholding tax at a rate of 5%.

Peer-to-Peer Lending:

Earning income from peer-to-peer lending is subject to income tax in Kenya. If you earn 10,000 KES in interest income from a peer-to-peer lending platform, you would owe income tax on that amount based on your income level.

It’s important to keep in mind that tax rules can change over time, so it’s important to stay informed and up-to-date. It’s also a good idea to consult with a tax professional if you have questions about your specific situation.

In summary, when it comes to investing in Kenya, it’s important to consider the tax implications of your investments. Understanding the tax rules can help you make informed decisions and maximize your returns over time. By staying informed and taking a proactive approach to taxes, you can make the most of your investments and achieve your financial goals.