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Exemptions on Payment of Stamp Duty & Other Taxes in Kenya

This is a tax payable on various transactions and instruments as provided for in the Stamp Duty Act.

In my practice, the common taxes payable include stamp duty on transfers and leases for land, stamp duty on charges and deeds, and capital gains tax (CGT).

In some circumstances, these taxes can be waived. CGT already has a list of exemptions, the most common of which is transfers of land where the gross purchase price is Kshs. 3 million and below.

The power to exempt instruments from stamp duty lies with the Cabinet Secretary for matters related with to Finance as per Section 106 of the Act. The Cabinet Secretary (CS) for Finance may on recommendation by the CS for Land direct that any instrument be exempted from the provisions of the Stamp Duty Act. This has to be published in the Kenya Gazette and meet public interests.

EXEMPTED TRANSACTIONS

The most commonly-occurring circumstances are:

  • Where property held by a nuclear family is to be transferred to an LLC (limited liability company). The rider is that the LLC has to be wholly owned by members of the same nuclear family.
  • Where the property to be transferred is between associated companies. The collector has to ensure that the effect is to transfer beneficial interest in property from one company to another and that one of the companies is a beneficial owner of not less than 90% of the issued share capital of the other.
  • Where there is transfer of interest in a property from one trustee to another, or to an additional trustee. There is a time limitation, however, as the instruments have to be executed before the 31st December 2022 to enjoy that exemption.
  • Where the transfer of property is between spouses, that is, between husband and wife.
  • Where the transfer in favour of a body or persons established for charitable purposes such as companies limited by guarantee (CLG’s) and Trusts.
  • On wills, codicils, and other testamentary dispositions.

OTHERS include:

  • Transactions where the Government would be liable to pay the duty.
  • On bills of exchange, cheques or promissory notes drawn or made in Uganda or in Tanzania thus valid in Kenya, and any conveyance or transfer of any securities in any company incorporated in Uganda or Tanzania, and stamp duty was already paid in Uganda or Tanzania.
  • When purchasing a ship, whether absolutely or by way of mortgage or otherwise, or even of any part, interest, share or property of or in a ship.
  • A bond given by a public officer for the due execution of his duties.
  • Instruments for the sale or transfer of land for the construction or expansion of educational institutions: Provided that stamp duty shall become payable if such land reverts to any other use.
  • The sale, conveyance and transfer or issue of shares, preferred shares, stocks, etc. at the Nairobi Securities Exchange, including companies incorporated within the East African Community.

THE PROCEDURE

The applicant makes an application to the collector of stamp duty at the Ministry of Lands for exemption. This application will be accompanied by:

  • A cover letter wherein the applicant will state the section of the Act relied upon in seeking the exemption.
  • A statutory declaration or affidavit stating facts that support the exemption, and attached the requisite supporting documents.

CGT exemption is applied for through the purchaser’s iTax account. In this particular exemption, one has to attach a valuation report, and provide the relevant transactional documents as evidence of the value of the transaction.

For more information, reach us on alice@amlawkenya.com if any of the above circumstances apply to you.

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