Understanding Stamp Duty in Kenya: What You Need to Know Before Investing.

Stamp duty is a compulsory tax that the Kenyan government levies on specific legal documents, such as property deals. For property transactions, Stamp Duty is an important facet of the process as it ensures that documents are legally binding. This tax provides government revenue and formalizes the transfer of ownership of properties.

Legal Framework
The imposition of stamp duty on property transactions in Kenya is provided for in the Stamp Duty Act (Cap 480). It specifies the documents covered by stamp duty, the rates applicable to them, the exemptions, and the penalty for non-compliance. Assessing, collecting, and managing stamp duty payments are the mandate of the Kenya Revenue Authority (KRA).

When is Stamp Duty Payable?
Stamp duty is payable upon the transfer of ownership of property, such as:

• Sale of land or buildings
• For lease agreements beyond a specified term
• Transfer of shares in companies holding immovable property
• Mortgages and debentures

Stamp Duty payments have to be made before the property transfer document is registered with the relevant authorities.

How is Stamp Duty Calculated?
The amount of stamp duty generally depends on the value of the property or the consideration price, whichever is higher. The rates are as follows:

• Urban Areas: 4% of the property’s value
• Rural Areas: 2% of the property’s value
• Leases of More than 21 years: 2% of the property’s value
• For leases of less than 21 years, 1% of the annual rent times the lease term

Exemptions and Relief
Certain property transactions are exempt from stamp duty or qualify for relief. These include:

• Transfers between spouses
• Transfers between parent and child
•  Transfers to charitable organizations
• Government acquisitions

In addition, first-time home buyers under affordable housing schemes may be eligible for reduced stamp duty rates.
Payment Process

1. The Property must be valued by the Ministry of Lands or A Certified Valuer.
2. KRA determines how much stamp duty to pay based on property value.
3. Payment Methods: Payment is made through KRA’s iTax portal or through authorized banks.
4. Payment Reconciliation: When you pay, your documents get stamped to show that you have paid and complied.
5. Registration of Transfer: The stamped documents are handed over to the appropriate land Registry for registration.

You can make stamp duty payments online from the Kenya Revenue Authority iTax portal. See below Steps

1. Log in to the iTax portal and select “Payment Registration.”
2. Select “Agency Revenue” as the tax heading and “Stamp Duty” as the subhead.
3. Under payment type, choose “Self-Assessment” and then Payment Registration.
4. Enter the Bill Reference Number (Transaction Reference Number).
5. Select the appropriate type of instrument from the drop-down list.
6. Proceed to input seller (transferor) and buyer (transferee) info.
7. Select the appropriate type of instrument from the drop-down list.
8. Then enter the seller (transferor) and buyer (transferee) information.
9. Enter the “Declared value”, “Date of Instrument”, and “Tax rate” in the Stamp Duty obligation details.
10. To generate the payment slip, select the mode of payment and click the submit button. After that, make the payment via bank transfer or Mpesa using Paybill number 572572. Penalties for Non-Payment

Failure to pay stamp duty is penalized, including:

• The Government applies interest on the unpaid amount.
• Fines
• Rejection of documents by the Land Registry.

Conclusion
Property transactions in Kenya are incomplete without stamp duty, which is essentially the charge for the legal recognition of an ownership transfer and is an important avenue for accruing government revenue. By understanding the applicable rates, exemptions, and payment procedures, property buyers and sellers will easily adhere to the law and avoid unnecessary penalties. Seeking advice from legal and tax experts will help streamline the process and take out any uncertainty.