Understanding Stamp Duty on Land Transfer

Stamp duty is the tax a government places on legal documents, usually in the transfer of assets or property. Governments impose stamp duties, also known as stamp taxes, on documents that are needed to legally record certain types of transactions. In this blog, we are going to answer a number of questions in relation to this topic including:

1. Who pays for stamp duty in Kenya?
2. How much is stamp duty on land in Kenya?
3. Stamp duty exemptions
4. Is stamp duty payable on a gift in form of property?
5. How is stamp duty and registration calculation done in Kenya?
6. How to generate stamp duty payment slip on iTax
7. Instruments assessed for stamp duty

Who pays for stamp duty?

In Kenya, this fee is paid by the purchaser of the property to the government based on the current value of the property. In Kenya, the rate is 4% for any property within a municipality and 2% for those away from municipalities. Just for caution, as a way to avoid paying more cost it is important to ensure that the transfer of the property is done in a formal way through the lands registry.

This saves you the cost of having to pay more stamp duty when the property appreciates rather you pay based on the current value of the property.

Exemptions

Knowledge is power and when doing land transactions, it is important to take advantage of exemptions available and save on costs. There are various exemptions by Kenya Revenue Authority. Below are some of the exemptions that you need to be aware of:

1. Transfer of land to charitable organizations as gifts.
2. Transfer of property between spouses.
3. Transfer of family property to the members on demise of a family member in whose name the property was registered.
4. Transfer of 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. Transfer of 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 grown rapidly and governments across the world are embracing technology and electronic services. KRA also embraces online services to increase convenience and efficiency to their members. One such platform is iTax which simplifies the process of making tax transactions. With iTax you can generate a payment slip conveniently using these steps at the comfort of your home or office:

1. Log on to the taxpayer’s iTax portal
2. Select “Payment Registration”
3. Under Tax Head select “Agency Revenue”
4. Under Tax Sub Head select “Stamp Duty”
5. Under Payment Type select “Self-Assessment” then select payment registration
6. Under Type of Instrument fill in type of instrument from the drop-down
7. Under Tax Payer’s and other Party’s details (where applicable) fill in the appropriate details
8. Under 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 instrument.
10. Under the tax rate fill in 100% (ensure the amount to be paid is the assessed value).
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 though M-PESA or bank.

Additionally, some of the documents you require for these process include a KRA PIN, your iTax password and the other party’s KRA PIN for you to transact efficiently.

Which instruments are assessed?

Assessing stamp duty is essential in determining the amount to be paid to the tax authorities. The word instruments is leg and refers to the documents put into consideration and are legally binding during property transfer. In this section we will look into two aspects: instruments assessed and those not assessed. Instruments assessed include:

1. 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.
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 i,.e Chattels Mortgage, R.L 19, R.L 7, R.L 57,Assents, Mining Contracts
4. City Council Leases are assessed at 60 pounds.
5. Deed of Partition is assessed at two (2) percent of the lower value. To convert the value to Kenya pounds its divided by 20.
6. Partnership Deed is assessed at fifty (50) pounds.
7. Agreements pursuant to a power of Attorney is assessed at 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 it?s divided by 20.
8. Surrender, revocation of power, supplemental charge, and partial discharge is assessed 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?s divided by 20.

In addition, some instruments that are not assessed 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. In case you have any questions regarding stamp duty you can ask them in our comments section.

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