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
aamendment to the Stamp Duty Act includes provisions to allow the Collector of Stamp
Duties to refer a valuation 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.
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:
All payments for land transactions attracting stamp duty shall be made
to the State Department for Lands and Physical Planning through e-Citizen via
paybill number 222222. Further payment instructions are available when clients
click 'PAY' on the Ardhisasa platform.
M-PESA
PAYMENT OPTIONS
Option 1
1. Click on the featured link on the
invoice to receive an MPESA menu
2. Enter the MPESA pin and then click on OK
3. You will receive a confirmation SMS from
M-PESA
Option 2
1. Go to M-PESA menu on your phone
2. Select Paybill option
3. Enter Business Number 222222
4. Enter the Account Number featured in the
instructions
S. Enter the amount to be paid
6. Enter your M-PESA pin and Send
0746 962239/0794 067815 020 2717289
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 sellers 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.
.jpeg)
.jpg)
.jpg)
