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Stamp duty payment for real estate transactions in Kenya

Stamp duty payment for real estate transactions in Kenya

The Ministry of Lands will is responsible for the collection of stamp duty paid for land transactions as the Kenya Revenue Authority (KRA) relinquished one of its revenue-collecting role amid a push by the government to have all revenues collected through a single pay bill.

From November 27, 2023, all payments for land transactions attracting stamp duty shall be made to the State Department for Lands and Physical Planning through the e-Citizen via pay bill number 222222.

The Lands Act and Registered Lands Act state that legal instruments such as leases, transfers, charges and mortgages will not be accepted unless they are duly stamped.  

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. Recent amendment to the Stamp Duty Act includes provisions to allow the Collector of Stamp Duties to refer a aluation of property for Stamp Duty to a registered and practicing valuer and not necessarily a government valuer.

Stamp Duty on sale of Property 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:

·        4% for land/property within a municipality

·        2% for agricultural land or property outside a municipality

·        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.

 HERE IS A LIST OF HOUSES AVAILABLE FOR SALE


 

One can apply for stamp duty exemption in Kenya when:

·        Transfer to held by family to a limited liability company wholly held by members of the same family.

·        Transferring between associated companies.

·        Transfer between spouses.

·        Transfer in favour of any body established for charitable purposes.

How to pay stamp duty in Kenya

How do I pay Stamp Duty on Ardhisasa?

  • Log-in to ‘Ardhisasa’.
  • Click on the ‘Ardhipay’ option.
  • Click on ‘Stamp Duty Self Assessment’.
  • Navigate to the ‘New Application’ button and click on it.
  • Provide the relevant information & documentation needed and click on ‘Submit’.
  • Once the invoice has been generated, click on the ‘Pay’ button.
  • Choose a payment method & follow the instructions therein.

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 seller’s 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, contact us on 0726982982.

Stamp Duty FAQs for ArdhiPay

What is Stamp Duty?

This is tax levied on legal instruments such as land transactions, agreements, shares, among other instruments.

What payment methods are accepted when paying for stamp duty?

Stamp duty can be paid through a variety of payment methods, including:

  • M Pesa
  • M Pesa Express
  • Pesaflow Direct
  • Kenya Commercial Bank
  • Real Time Gross Settlement (RTGS)
  • Airtel money

Are there any fees when paying stamp duty?

The payment processing is facilitated through e-citizen, and for each generated invoice, there is a convenience fee of 50 shillings.

What should I do if my payment fails or is declined?

If you encounter a payment failure, which can sometimes be due to factors like insufficient funds or payment method issues, we kindly advise you to review your payment details carefully and make another attempt. If the issue continues to persist, please don’t hesitate to reach out to customer support team for prompt assistance.

How can I view my payment history and receipts?

To view your payment history and receipts, simply log in to your account and head to the “Ardhipay” section located on the left-hand panel of the system. In this section, you will find two tabs: “Unpaid Invoices” and “Paid Invoices.” These tabs provide a comprehensive summary of all your payments, both those that have been paid and those that are still outstanding.

Important Payment Guidelines for stamp duty.

  • Ensure your payment matches the exact invoice amount to avoid overpayments or partial payments.
  • Verify the invoice reference number and accurately input it during the payment process.
  • Direct all payments to the authorized account as specified in the provided payment instructions.
  • Previous accounts have been suspended and should not be used for any further payments.
  • Before submitting an invoicing application, it’s crucial to double-check all payment details. Key identifiers, such as the parcel number and uploaded documents, must be accurate. Any mistakes in these details could result in lost payments, so please verify them carefully before proceeding.

 

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