Understanding Stamp Duty on Land Transfer (2024)

Stamp duty isthe 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 required 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, the purchaser of the property pays this fee 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. To avoid paying more cost, it is important to ensure that you transfer the property in a formal way through the land registry, just for caution.

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 Transfer of:

1. land to charitable organizations as gifts.
2. Property between spouses.
3. The family property is transferred to the members upon the demise of the family member in whose name the property was registered.
4. 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. 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 also 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. Tax Head select “Agency Revenue”
4. Tax Sub Head select “Stamp Duty”
5. Payment Type select “Self-Assessment” then select payment registration
6. Type of Instrument fill in type of instrument from the drop-down
7. Tax Payer’s and other Party’s details (where applicable) fill in the appropriate details
8. 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. Fill in 100% under the tax rate, ensuring that the assessed value is the amount to be paid.
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 for the tax authorities to determine the amount that must be paid.The word instruments is leg and also 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, Easem*nts, 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. We assess the Deed of Partition 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. The assessing authority charges 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. We assess surrender, revocation of power, supplemental charge, and partial discharge 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.

Additionally, some instruments that do not undergo assessment 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.