Stamp duty can be refunded

Times Tower, the seat of the Kenya Revenue Authority. [PHOTO: JENIPHER WACHIE / STANDARD]

Kenya: Some readers wrote to this column with one chief concern: The payment of stamp duty. Some thought the revenue is too high and encouraged thoughts of evasion. Sample this. Titus Wafula says his lawyer told him that transferring property in his name was impossible without paying the tax, which is true.

“Can the State refund the amount paid in case the transaction turns sour? asks Wafula.

Maureen Njeri, a reader who wants to venture into residential real estate, wants to know the period within which to apply for a refund.

“I am aware that the revenue has to be paid to the Kenya Revenue Authority ...what of the period for a refund?” poses Njeri.

Musembi Mutua wrote to ask whether delayed payment of the revenue can be accepted in cases of unavoidable circumstances.

 Refund

“A property transaction may drag following errors or omissions caused by bureaucracies in Government...what happens in such situations?” asks Mutua. Stamp duty can be refunded if the collector is satisfied that it was assessed wrongly.

The application for a refund should be made within one year after the date of payment.

It is also important to abide by the provisions of the Stamp Duty Act when paying the revenue. For instance, when the transaction documents are prepared locally, the tax should be paid within 30 days.

For documents executed abroad and sent for registration locally, stamp duty must be paid within 30 days of receiving the documents. In case of a misunderstanding, the date of receiving the documents must be proven. Legally, the collector of the revenue has the authority to allow delayed payment when satisfied that the omission or neglect did not arise from attempted evasion or fraud.

A penalty may be imposed or waived on the discretion of the collector. Deals to evade payment of stamp duty during property transactions have dire consequences for investors.

The crafty investors and brokers who collude with lands officials not to pay the tax mainly attempt to cut down transaction costs.

Stamp duty for property bought in urban areas is charged at 4 per cent of the value of the house/land and 2 per cent in rural areas.

For example, if a house costs Sh8 million, revenue of Sh320,000 will be paid to the Government as stamp duty while Sh160,000 would be levied for a similar property in rural areas.

 Fine

According to Section 20 of the Stamp Duty Act, failure to pay the revenue amounts to a fine. The tax is also levied in developed countries.

Back home, before the recent automation of Ardhi House, rampant fraud at the Ministry of Lands  left millions of property owners holding onto fake stamp duty and land rent receipts, even as they remained unknowingly indebted to the Government. The real estate investors, whose number is yet to be determined, are holding fake documents, mostly sourced from the notorious Nairobi River Road area, in the mistaken belief that they have paid the required levies to the taxman.

— The writer is an Advocate of the High Court of Kenya.

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