Evasion of stamp duty attracts a fine

By Harold Ayodo

Many real estate investors are not aware that stamp duty can be refunded in case a transaction is unable to be completed for various reasons.

The duty, which is four per cent of the property value in urban areas and two per cent in rural areas, is paid to the Government during purchase of property.

Therefore, if a house costs Sh8 million, revenue of Sh320,000 will be paid to the Government as stamp duty.

Some investors have complained that the duty is too high, considering that a buyer pays other costs such as lawyer, valuers, transfer and registration fees.

A reader, Titus Wafula, says his lawyer told him that transferring property to his name was impossible without paying the tax, which is true.

Stamp Duty Act

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

Ministry of Lands Permanent Secretary Dorothy Angote recently said some law firms were under investigation for evading payment of stamp duty.

"But can the Government refund the amount paid in case the transaction turns sour?" asks Wafula.

Maureen Njeri, who has invested in residential real estate, wants to know the process of applying for the refund and how long it takes to get it.

"I am aware that the revenue is paid to the Kenya Revenue Authority (KRA), but what does it take to get it back?" asks Njeri.

Stamp duty can be refunded if KRA 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.

Delayed payment

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.

However, KRA has the authority to allow delayed payment if satisfied that the omission or neglect did not arise from attempted evasion or fraud. A penalty may be imposed or waived at the discretion of the collector.

The writer is an advocate of the High Court of Kenya.