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Stamp Duty Explained: Here's What It Is & How It Works

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When Christine came to our office, she seemed confused and was eager to sit down with the sales manager. "Should I pay the stamp duty as you do my transfer?" She asked. Christine had just bought two plots at Dhahabu Plains Matuu Phase 2. Luckily for Christine, Dhahabu Land Ltd's land cost includes transfer fees and stamp duty, but we understood it was important that we take her through what stamp duty is, who should pay stamp duty, and when it should be paid. You may be surprised from even a search on Google thatthousands of Kenyan internet users out there still don't know what stamp duty is. So LET'S TALK STAMP DUTY.

What is stamp duty?

Stamp duty is a tax levied on various transactions such as the transfer of properties, shares, and stocks.

Who pays the stamp duty on a property?

The home/land buyer always pays stamp duty, not the seller, unless the buyer has an arrangement with the seller to do so.

How much is stamp duty?

The current stamp duty rates are 4% of the valuation amount for lands within municipalities (leaseholds) and 2% for land outside municipalities (freeholds). However, through the Tax Laws (Amendment) Bill signed into law by President Uhuru Kenyatta in 2018, the government amended the Stamp Duty Act to exempt individuals buying their first homes. Therefore, all buyers and sellers of property are required to update their profiles on iTax to facilitate stamp duty. Stamp Duty will also be exempted on a family property transfer to a company wholly owned by the same family members. It does not occur automatically, though, it must be applied for and evidence provided.

Refunds of stamp duty are only granted if the collector is satisfied that the tax assessment was wrong. A refund application is filed within one year from the payment date. It is also important to abide by the provisions of the Stamp Duty Act when paying stamp duty on real estate transactions such as leases, transfers, and mortgages. For documents prepared locally, stamp duty must be paid within 30 days.

How to pay stamp duty:

  1. Log on to the iTax portal
  2. Under the payment menu, select "Payment Registration."
  3. Select the tax head applicable as agency revenue and the subhead as Stamp Duty.
  4. Fill in the applicable details to the end and submit, after which you get the payment slip.
  5. After that, make the payment either through the bank or using the M-PESA PayBill Number provided by KRA on the iTax portal.

This process is quite seamless and one of the simplest in the iTax system. Christine left Dhahabu Lands Ltd's offices content and with a better understanding of stamp duty and the process of land buying. She was happy with how Dhahabu handled the whole process for our clients and even invited her friend to come for a site visit and see why everyone is rushing to buy Dhahabu Plains Matuu Phase 2. If you're a Kenyan looking to buy property, you'll have to familiarize yourself with stamp duty. But it's not that hard! While you shouldn't stress about it too much, you should make sure you understand the tax basics and how to best account for it as a property owner in Kenya.

𝑫𝒉𝒂𝒉𝒂𝒃𝒖 𝑳𝒂𝒏𝒅 𝑳𝒊𝒎𝒊𝒕𝒆𝒅
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