What You Need to Know About Stamp Duty

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What You Need to Know About Stamp Duty

Stamp duty is a charge levied by the government of Kenya on legal papers, typically in the transfer of assets or property. Stamp duties, sometimes known as stamp taxes, are imposed by the Kenyan government on documents necessary to legally record certain sorts of transactions.

Who is the collector of stamp duty?

Kenya Revenue Authority (KRA) is mandated to collect stamp duty in Kenya under Section 2 of the Stamp Duty Act (Cap 480).

Who pays for stamp duty?

The Kenyan government imposes a stamp duty on property purchases, calculated according to the property’s current valuation. The rate is 4% for properties within municipalities and 2% for those outside municipal boundaries. To prevent additional fees, it is essential to lawfully transfer the property through land registration. This strategy safeguards against increased stamp duty costs as the property appreciates and ensures that you pay based on its current value, minimizing financial obligations.

Instances where Stamp duty is an exemption

When it comes to property purchases, it is critical to take advantage of any exemptions and save money. KRA offers a number of exclusions. Below are some of the exemptions that you need to be aware of Transfer of:

  1. land to charitable organizations as gifts.
  2. Property between spouses.
  3. The family property is transferred to the members upon the demise of the family member in whose name the property was registered.
  4. Land from a Holding Company and its subsidiaries, where the holding company owns not less than ninety percent (90 %) of the shares of the subsidiary, etc.
  5. Family property to a company wholly owned by the same family (by virtue of Legal Notice Number 92 of 2007 issued pursuant to Section 106 of the Stamp Duty Act).

How to generate stamp duty payment slip on iTax

One can generate a stamp duty payment slip via KRA’s iTax , a streamlined platform designed to simplify the stamp duty payment process. This guide outlines the straightforward steps to generate a stamp duty payment slip through iTax, providing a user-friendly approach for individuals seeking to fulfill this requirement from the comfort of their homes or offices.

  1. Log on to the taxpayer’s iTax portal
  2. Select “Payment Registration.”
  3. Tax Head: select “Agency Revenue.”
  4. Tax Sub Head: select “Stamp Duty.”
  5. Payment Type: select “Self-Assessment,” then select payment registration
  6. Type of Instrument: fill in the type of instrument from the drop-down
  7. Tax Payer’s and other Party’s details (where applicable) fill in the appropriate details
  8. Bill Reference Number: fill in your transaction reference number (a maximum of 6 characters)
  9. Under Declared Amount, fill in the assessed amount. Add Kshs. 20 for each copy of the instrument.
  10. Fill in 100% under the tax rate, ensuring that the assessed value is the amount to be paid.
  11. Alternatively, the tax rate can be the prescribed percentage of the amount to which duty is assessable. It should add up to the assessed amount.
  12. Submit the form and generate the payment slip
  13. Proceed to make the payments through M-PESA or the bank.

What is the due date for stamp duty?

Transaction instruments prepared locally require tax payment within 30 days after assessment. For documents executed abroad and sent for local registration, stamp duty must be paid within 30 days of receiving the documents.

Which instruments undergo assessment for stamp duty?

A stamp duty assessment is necessary for tax authorities to establish the amount that must be paid. The term instruments refer to the documents that are considered legally binding during property transfers. Additionally, some instruments that do not undergo assessment for stamp duty include court orders, affidavits, cautions, caveats, and wills.This section will look at two aspects: instruments that have been assessed and those that have not been assessed. The instruments evaluated include:

  1. All land transactions involving a change of ownership, either through valuable consideration, gifts, or partition of land, attract stamp duty, except where specifically stipulated by law.
  2. Charges, mortgages, and debentures
  3. Bonds, consultations, deeds, Easements, general and specific power of Attorney, Variation of a Document, Commissioner of Oaths, Deed of indemnity, Guarantee, instruments under the chattels Transfer Act, e.g., Chattels Mortgage, R.L 19, R.L 7, R.L 57, Assents, and Mining Contracts
  4. City Council leases are assessed at 60 pounds.
  5. We assess the deed of partition at two (2) percent of the lower value. To convert the value to Kenyan pounds, it is divided by 20.
  6. Partnership Deed is assessed at fifty (50) pounds.
  7. The assessing authority charges five (5) pounds on the agreement and four (4) percent of the consideration on the power of attorney. To convert the value to Kenyan pounds, it is divided by 20.
  8. We assess surrender, revocation of power, supplemental charge, and partial discharge at one (1) pound.
  9. Increase of nominal capital is assessed as 1 percent of the increased amount. To convert the value to pounds, it is divided by 20

What happens when there is non-payment?

Non-payment of the duty results in the invalidity of the relevant transaction, and any agreement signed between the parties becomes null and void, and the same is inadmissible in a court of law as evidence.

What is the penalty for not paying?

Failure to pay the duty and/or assessed amounts leads to a fine that is assessed at five percent (5%) of the principal assessed stamp duty for every quarter from the date of the instrument.

Initiating the land transaction journey with a thorough understanding of stamp duty places you in an advantageous position, enhancing your confidence and informed decision-making throughout the buying or selling process.