Stamp Duty is a tax levied on legal instruments such as cheques, receipts, military commissions, marriage licenses, property and land transactions.

During the process of buying and selling of real estate properties, one step involves the buyer or their advocate planning for the property to be assessed for stamp duty by a Valuer and subsequently stamping of transfer documents.

Rate of Stamp Duty in Kenya.

Stamp Duty is calculated on the property value or the purchase price agreed upon; whichever is higher. The rate varies by location of the property and is:

1. 4% for land/property within a municipality
2. 2% for agricultural land or property outside a municipality
3. 1% if a property is registered as a company and transfer is by way of shares rather than title

For instance, an investor buying a Sh10 million house needs to part with Sh400,000 as stamp duty costs. Through the Tax Laws (Amendment) Bill, the government has amended the Stamp Duty Act to exempt individuals buying their first homes from paying stamp duty.

Stamp Duty on Property Leases

Stamp duty is levied on property leases at varying rates, depending on the lease duration. Stamp duty is levied at a flat rate of 1% on period leases up to 3 years, and at a flat rate of 2% on period leases exceeding 3 years. The highest figure used in cases of fluctuating rents. Hence, for an annual rent of Sh1 million, duty of Sh10,000 is paid.

Stamp duty on Mortgages in Kenya

Stamp duty charge for mortgages in Kenya is payable at the rate of 0.1% of the amount secured by any principal security document. Stamp duty is payable on supplemental security documents at the nominal rate of at Sh2 per every Sh1,000.

Exemptions for stamp duty exemption in Kenya :

1. Transfer to held by family to a limited liability company wholly held by members of the same family.
2. Transferring between associated companies.
3. Transfer between spouses.
4. Transfer in favour of any body established for charitable purposes.

How to pay stamp duty in Kenya:

1. Log on to the iTax portal.
2. Under the payment menu select “Payment Registration”.
3. Then select the tax head applicable as “Agency Revenue” and the subhead as “Stamp Duty”
4. Under payment type select “Self-Assessment” and then payment registration
5. Enter the Bill Reference Number (transaction reference number)
6. Under the type of instrument, select the applicable one from the drop down list.
7. Then enter the seller (transferor) and buyer (transferee) details.
8. Under the obligation details for Stamp Duty, enter the “Declared value” the “Date of Instrument” and “Tax rate”.
9. You can then select the mode of payment and submit to generate the payment slip. Thereafter make the payment either through the bank or using the Mpesa option with paybill number 572572 .

The Stamp Duty Act states that documents must be stamped within 30 days of acquisition or invite a penalty. For transactional instruments that are prepared locally, the tax should be paid within 30 days. However, for documents executed abroad and sent for registration locally, Stamp Duty must be paid within 30 days of receiving the documents. If, for whatever reason payments exceed the charged amounts, applications for refunds should be made within one year.

When Stamp Duty is not paid within that time frame, this results in the invalidity of the relevant transaction, any agreement signed between the parties becomes null and void, and the same is inadmissible in a Court of Law as evidence. Failure to pay the revenue also 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.

After payment of stamp duty, the real estate agent, conveyancing lawyer or the busier lodges the property for registration in favour of the buyer. After the registration process, the sellerâs advocate is legally permitted to release the full proceeds of the sale to the seller. Consequently, the buyer is officially handed over possession of the property and becomes the new legal owner.

 You can download a copy of the Stamp duty in Kenya Act here.

If you are unfamiliar with the taxation process, we recommend you find a good tax advisory firm that can assist you with advice and assist you with completing needed transaction. We try to offer our clients the most comprehensive and dedicated service possible at no extra cost. Where we are unable to help, we then recommend that you instruct the services of another firm or advocate to receive appropriate legal advice and representation throughout the sales process.

TAQ

Who is the collector of stamp duty?

Kenya Revenue Authority through Itax

What is the rate for stamp duty?

It is payable in different rates, depending of the nature of the instrument.

What is the due date for stamp duty?

Transaction instruments that are prepared locally, the tax should be paid within 30 days after assessment. Documents executed abroad and sent for registration locally, Stamp Duty must be paid within 30 days of receiving the documents.

What is the penalty for not paying stamp duty?

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.