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Stamp Duty: What You Need to Know Before Purchasing Land in Kenya

Land buyers in Kenya must pay stamp duty for land transactions to be deemed valid. This article will help you learn what stamp duty is, stamp duty rates in land transactions, how to pay the duty, and the consequences of failing to pay stamp duty in Kenya.   

What is Stamp Duty?

The Kenya RevenueAuthority (KRA) defines stamp duty as a tax levied on legal instruments like land transactions, shares, receipts, cheques, marriage licenses, and military commissions.  

In the land acquisition context, stamp duty helps the Kenyan Government earn revenue from land sales, leases, and mortgages. The KRA requires the individual, group, or organization acquiring land to pay a certain percentage of the land’s market value as the stamp duty.

Stamp Duty Rates in Kenya

The Government of Kenya does not charge the same stamp duty rate for all land transactions. Stamp duty rates differ based on a parcel of land’s location, use, and the nature of the transfer.  

Currently, the different stamp duty rates in Kenya are:

  • 1% if the land is transferred by way of shares and not a title deed (applies when land is registered as a company)
  • 2% for land located outside a municipality or intended for agricultural use
  • 4% for land located in a municipality

The different rates are not set in stone. The Government of Kenya could increase or decrease the rates if it were to deem such necessary.

Land Valuation for Stamp Duty Calculation

Land valuation is a key step in the land-buying process in Kenya. The figure that the KRA uses to calculate the stamp duty for a parcel of land is its market value.

Since land is sometimes sold below its market value, the Ministry of Land’s Department of Valuation independently values each parcel of land about to be sold and establishes its market value at the time of the sale.

To apply for valuation, you must fill out a land valuation form and submit the same to a land registry in the area where the land you are buying is situated. The Department of Valuation will send a valuer to establish the land's market value.    

Stamp Duty Exemptions 

Stamp duty is not levied on all land transactions. Such duty is exempted for particular cases. Those cases are:

  • Transferring land to a charitable organization
  • Land transfer from one spouse to another
  • Transferring family land to a limited liability company (LLC) fully owned by the family members
  • Land transfer between associated companies  

How to pay Stamp Duty in Kenya

The KRA requires land buyers to pay stamp duty within 30 days after assessment in local transaction cases. However, if a transaction is executed abroad, the duty should be paid within 30 days of receiving documents in Kenya.

The steps for stamp duty payment are as follows:

  1. Log in to ‘iTax.'
  2. Select the 'Payments' option.
  3. Select the 'Payment Registration' option.
  4. Select the Tax head ‘Agency Revenue.'
  5. Select the Subhead ‘Stamp Duty.'
  6. For payment type, select ‘Self–Assessment.'
  7. Click on payment registration and fill in the bill reference number, nature of the instrument, details of the transfer (PIN), details of the buyer (PIN), details of stamp duty, rate of instrument, the total amount to be paid, and mode of payment.
  8. Click ‘Submit.'

After completing the steps, you will get a payment slip. Use the slip to pay the tax using your selected payment method.

Consequences of Failing to Pay Stamp Duty

Failing to pay stamp duty within the set period or at all has dire consequences.

Failing to pay the duty in time will attract a penalty that will keep increasing as time passes.

Land transactions whose stamp duty is unpaid are invalid. Thus, you cannot use the land sale agreement you signed with the seller in a court of law in Kenya as it is deemed null and void.

Pay your stamp duty in time to safely buy land in Kenya.    

 

 

Location: Kenya

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