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 Kenyan government on documents necessary to legally record certain sorts of transactions. In this blog, we will answer a number of questions on this topic, including:
Who pays for stamp duty?
In Kenya, the purchaser of the property pays the government this charge based on the property’s current valuation. In Kenya, the rate is 4% for properties located within a municipality and 2% for those located outside of municipalities. To avoid incurring additional fees, ensure that you transfer the property in a legitimate manner through the land registration. This saves you the cost of having to pay more stamp duty when the property appreciates rather you pay based on the current value
Exemptions
Knowledge is power, and when it comes to property purchases, it is critical to take advantage of any exemptions and save money. Kenya Revenue Authority offers a number of exclusions. Below are some of the exemptions that you need to be aware of Transfer of:
land to charitable organizations as gifts.
Property between spouses.
The family property is transferred to the members upon the demise of the family member in whose name the property was registered.
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.
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
Technology has advanced swiftly, and governments all over the world are adopting technology and computerized services. KRA also adopts online services to improve member convenience and efficiency. iTax is one such platform that streamlines the tax transaction procedure. With iTax, you can easily generate a payment slip from the comfort of your own home or office by following these steps:
Payment Type select “Self-Assessment” then select payment registration
Type of Instrument fill in type of instrument from the drop-down
Tax Payer’s and other Party’s details (where applicable) fill in the appropriate details
Bill Reference Number, fill in your transaction reference number (a maximum of 6 characters)
Under Declared Amount fill in the assessed amount. Add Kshs. 20 for each copy of instrument.
Fill in 100% under the tax rate, ensuring that the assessed value is the amount to be paid.
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.
Submit the form and generate the payment slip
Proceed to make the payments though M-PESA or bank.
Additionally, some of the documents you require for this process include a KRA PIN, your iTax password and the other party’s KRA PIN for you to transact efficiently.
Which instruments are assessed?
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 as legally binding during property transfer. This section will look at two aspects: instruments that have been assessed and those that have not been assessed. Instruments evaluated include:
All land transactions involving change of ownership either through valuable consideration, gifts or partition of land attract stamp duty except where specifically stipulated by the law.
Charges, Mortgages and debentures.
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, Mining Contracts
City Council Leases are assessed at 60 pounds.
We assess the Deed of Partition at two (2) percent of the lower value. To convert the value to Kenya pounds its divided by 20.
Partnership Deed is assessed at fifty (50) pounds.
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 Kenya pounds its divided by 20.
We assess surrender, revocation of power, supplemental charge, and partial discharge at one (1) pound.
Increase of nominal capital is assessed as 1 percent of the increased amount. To convert the value to pounds its divided by 20.
Additionally, some instruments that do not undergo assessment for Stamp Duty include Court Orders, Affidavits, Cautions, Caveats, and Wills.
In conclusion, whether buying or selling land you need solid understanding of stamp duty. As Nyota Njema, we help you understand the process and then pay it on behalf of our client as part of title deed transfer processing.
