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Demystifying stamp duty charges

Updated Thursday, July 14th 2011 at 00:00 GMT +3
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By F T Odhiambo

Stamp duty is tax levied on various transactions such as transfer of properties, shares and stocks. It is collected by the Ministry of Lands, which has seconded the function to Kenya Revenue Authority (KRA). KRA in turn contracts commercial banks to collect the money at a commission. Stamp duty is major revenue earner for the Government.

Of all transactions that attract stamp duty, transfer of land contributes the biggest proportion as evidenced by the recent Sh7.9 billion collected by the Ministry of Lands, which also included land rents and other related land fees. This made the ministry one of the top revenue earners and in essence explains the importance of land to the country’s socio-cultural, political and economic development.

Stamp duty on land

Apart from land transactions involving Government ministries, parastatals, succession and transfer of property where the consideration is natural love and affection, all other land transactions involving change of ownership either through valuable consideration, gifts or partition of land attract stamp duty. Stamp duty is assessed at two per cent of the value of the property for rural holdings and four per cent for municipalities. For partitioned property, one of the resultant portions is exempted from stamp duty.

Once the necessary requirements like preparing the sale agreement, obtaining relevant land board consent and clearance of land rates and rent where applicable have been met, the other step is to prepare transfer forms — legal instruments to effect change of ownership.

Passport-size photographs of the concerned parties must be affixed on the transfer forms in addition to attaching copies of the National Identity Card/passports or certificates of incorporation and personal identity number (PIN), which must all be witnessed and certified by a judicial officer or any other person permitted by law. The documents are then presented to the respective land registry for valuation and assessment of stamp duty and other statutory fees.

Thereafter, the KRA forms are filled and payments of other fees done in the local government treasuries while stamp duty is paid in any of the authorised commercial banks.

Upon receipt of payment, the documents are lodged to enable issuance of new title deeds, lease or completing any other transaction as the case may be.

Delayed registration

There have been delays in stamping and registering documents as a result of commercial banks not submitting their vouchers to the respective land registries promptly. This has led to loss of man-hours and unnecessary expenditure on the part of the proprietors.

A recent sad case is where a Nairobi resident transacted a property in one of the city’s neighbouring districts. After going through all the formalities as required, it was late in the afternoon and the local bank had closed business. The next day, he made payments at one of the authorised commercial banks in the city and proceeded to the district land registry to lodge the document. He was shocked when informed that any payment not done in the local banks within the registry’s jurisdiction must be certified by the collector of stamp duty at Ardhi House, Nairobi and thereafter submitted to the respective land registry.

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