You can’t avoid stamp duty

We have identified a good family house and intend to buy it before Christmas this year. We do not have a problem with the Sh8 million purchase price but were taken aback that we must pay tax to the Kenya Revenue Authority Sh320,000 as stamp duty fees. How sensible is this?

Linda, Mombasa

The law requires that buyers of property pay stamp duty before transferring them to their names. Stamp duty for property bought in urban areas is charged at four per cent of the property’s value and two per cent in rural areas.

According to Section 20 of the Stamp Duty Act, failure to pay the revenue leads to a fine.

There were reported instances where some fraudsters allegedly colluded with insiders at the Ministry of Lands to evade the tax until the payments were automated recently.

Before the automation of services in Ardhi House, rampant fraud at the Ministry of Lands headquarters left millions of property owners holding onto fake stamp duty and land rent receipts even as they remain unknowingly indebted to the government.

The investors are keeping fake documents, mostly sourced from Nairobi’s River Road, in the mistaken belief that they have paid the required levies to the taxman.

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 misunderstandings, the date of receiving the documents must be proved.

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.

— The writer is an advocate of the High Court.

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