Stamp Duty in Kenya

Introduction

According to the KRA website, Stamp Duty is a tax levied on legal instruments such as cheque receipts, military commissions, marriage licences, property, and land transactions. As with many things in our country, it is regulated by laws we inherited from the British.

Stamp Duty was first introduced in England in 1694, initially for four years, towards carrying out the war against France at the time. The tax was so successful that it endures to this day through a series of Stamp Acts enacted since the time. Interestingly, the attempted enforcement of the ‘Stamp Act 1765’ in the British colonies in America led to the outcry of “no taxation without representation’’ that called for representation. The argument over stamp duty, among other arguments, eventually contributed to the American War of Independence.

Stamp Duty in Kenya

In Kenya, the Stamp Duty Act (Cap 480) was assented to in 1958, but has undergone several amendments since then with the latest being in 2012. The Regulations to the Act have however been amended as recently as 2020, when the Cabinet Secretary passed the Stamp Duty (Amendments) Regulations, 2020 and the Stamp Duty (Valuation of Immovable Property) Regulations.

The tax is payable in different rates depending on the nature of the instrument. Whatever the rate payable, the tax ought to be paid within 30 days after execution of the transactional documents, or within 30 days of receiving the documents, for transactional documents executed abroad.

Stamp duty is payable in Kenya in the following rates:-

Consequence of Non-Payment

Failure to pay Stamp Duty in Kenya has far reaching consequences, including the fact that said failure renders the transaction invalid. This therefore means that any agreement signed by the parties is effectively null and void. The same also becomes inadmissible in a court of law as evidence.

Failure to pay the revenue also leads to a fine that is assessed at 5% of the principal assessed Stamp Duty for every quarter from the date of the instrument.

Payment of Stamp Duty

The KRA blog on Stamp Duty gives the process for paying assessed Stamp Duty, including the Mpesa paybill number in which payments can be made.

Traditionally, parties submitted the transfer documents to the lands registry for assessment of the Stamp duty payable. Following the Stamp Duty (Valuation of Immovable Property) Regulations. 2020, the Stamp duty payable is currently calculated using a valuation report prepared by an approved valuer, prior to any transfer. Since the market value of the property affects the Stamp duty payable, it is important to engage a valuer that is approved so that the correct market value of the property is noted. Stamp duty is then paid to KRA before registration of the transfer is effected.

It is important to note that some transactions are however exempted from Stamp duty, such as the registration of some companies under the Companies Act and transfer of immovable property to beneficiaries of a deceased’s estate. For full insights into exemptions under the Act, read the article by MMAN Advocates.

Conclusion

Stamp Duty is payable on a number of transactions in Kenya, including transactions on immovable property. It is thus important to seek legal representation when negotiating and executing your transactions so as to avoid invalidating your documents, and/or any other pitfalls that may arise due to non-payment of Stamp duty.