PAYMENT OF STAMP DUTY

Purpose: Government Revenue

Who pays? The person benefitting from the transaction. In purchase of land, the buyer pays
stamp duty.

When is it paid? Within 30 days after valuation of the property.

What happens if you do not pay stamp duty?

Failure to pay means the document that is not stamped cannot be admitted in evidence. E.g
the sale agreement. In case there is a dispute, the sale agreement won’t be held as valid.

Is there a remedy for failure to pay stamp duty in time?

Under Section 19 (3) of the Stamp Duty Act, a party can be allowed time to have the
instrument that requires stamp duty to be stamped or stamp duty to be paid. Justice
Emukule, considered Section 19 (3) in the case of Surgi Pharm Ltd Vs Aksher Pharmacy Ltd
– Hcc 295 of 2004. He observed that under Section 19(3), if any unstamped instrument was
produced before a court, the court had three options to take; if the time for stamping had
expired, it shall be impounded unless it is forwarded to a collector, or the person presenting
it be given reasonable opportunity to apply to the collector for leave to stamp it out of time
or in other cases, the instrument will be received in evidence upon payment of the amount
of the unpaid duty and the penalty remitted to the collector of the document is admitted in
evidence upon payment of the amount of unpaid duty and the penalty remitted to the
collector after the document is admitted in evidence.

Legal Basis- Stamp Duty Act

Section 19(5) The penalty on stamping any instrument out of time referred to in paragraph (c) of
subsection (3) shall be ten shillings in respect of every twenty shillings and of any fractional part of
twenty shillings of the duty chargeable thereon and in respect of every period of three months or any
part of such a period after the expiration of the time within or before which the instrument should
have been stamped

Section 20. Stamping out of time

(1) Where an instrument is chargeable with stamp duty under this Act and should have been
stamped before a certain event or before the expiration of a certain period, but has not been so
stamped, a collector may give leave for the stamping of the instrument if he is satisfied—
(a) that the omission or neglect to stamp duly did not arise from any intention to evade payment of
stamp duty or otherwise to defraud; and

(b) that the circumstances of the case are such as to justify leave being given.

(2) If the collector grants leave under subsection (1) for the stamping of an instrument, the
instrument shall be stamped on payment of the unpaid duty including any additional stamp duty and
of a penalty of one shilling in respect of every twenty shillings and of any fractional part of twenty
shillings of the duty chargeable thereon and in respect of every period of three months or any part of
such period after the expiration of the time within or before which the instrument should have been
stamped:

Provided that—

(a) the penalty chargeable under this subsection shall not exceed one hundred per centum of the
principal duty outstanding; and

(b) the collector the collector may remit the penalty under this section up to a maximum of one
million five hundred shillings, but shall not remit any penalty exceeding that amount without prior
approval from the Minister.

(3) If any person applying for leave under this section is dissatisfied with the decision of the collector
upon that application, that person may require his application to be referred to the Minister, whose
decision thereon shall be final for all purposes.

1) (4) Upon any application for leave under this section, the collector, or the Minister, may
require sworn or other evidence in support of the application.

(5) When an instrument has been stamped by leave under this section it shall be deemed to have
been duly stamped.

In summary, you have the following option:

1) Seek leave to pay the stamp duty out of time- this process involves you writing to the
collector of stamp duty, explaining your reasons for not paying stamp duty on time. If
the reasons are valid i.e there is no indication of fraud, you’ll be granted leave to pay
the assessed amount plus a penalty of:
i. one shilling for every Twenty Shillings you would have paid within three
months of the time you were supposed to pay or;
ii. one shilling for every Twenty Shillings for the entire period if it is pasty three
months.
2) Pay the stamp duty assessed at first, including a penalty set by the commissioner.
 Note:
1) The penalty you’ll pay cannot exceed the amount you were supposed to pay in the
beginning. For instance, if you were to pay Kshs. 10,000/- as stamp duty, then you
failed to pay. When paying out of time, your penalty cannot go more than the initial
Kshs. 10,000/-
2) KRA have fixed the penalty at: (5%) of the principal assessed stamp duty for every
quarter from the date of the Instrument.
See < https://kra.go.ke/helping-tax-payers/faqs/stamp-duty >

On the contrary, the law of evidence requires that he who alleges must prove. In case of a
dispute, any person who will be raising the issue of non-payment of stamp duty will have to
prove.

In the case of Elias Njue Ireri v Kubu Benson Nderi & 3 others[2019] eKLR , Environment and
Land Case 327 of 2015< http://kenyalaw.org/caselaw/cases/view/170863 >

One of the issues for determination by the court was whether the suit property was
transferred without payment of stamp duty and other government taxes. There was scanty
evidence on record on this issue. The 1st Defendant contended that he paid stamp duty and
related penalties thereon in the sum of Kshs 15,000/-. He could not produce a payment
receipt because it could not be found. The transfer form in the parcel file indicated that
stamp duty was duly assessed one day after presentation of documents and that a further
assessment was done later on.

The Court stated as follows:

“Although there were no copies of receipts for payment of stamp duty in the parcel file at the
time of trial, that is not necessarily an indication that it was never paid. It is a matter of
public notoriety and the court takes judicial thereof that parcel files in Kenya hardly keep a
complete record of transactions. There are many such files which lack even the most basic
documents such as transfer forms and LCB consent letters. The court is aware that the sale
transaction was being handled by H.M. Utuku Advocate who apparently died before
concluding the process. The material on record also shows that the transfer in issue took
place more than 10 years before trial. It is possible for receipts to get lost after passage of
such a long period of time. The court is of the opinion that the 1 st Defendant had a
reasonable explanation for failure to produce the original receipts for payment of stamp
duty.”
The court has also considered the evidence of the Land Registrar who testified at the trial.
She stated that a triplicate of the payment receipt would normally be kept in the parcel file
and that a transfer would not be registered without payment of stamp duty. It was also her
evidence that upon processing of documents lodged for registration (which may take several
days), the ultimate entries in the register would be dated on the date of presentation of the
documents and not the date of completion of the process.

The court held that that the allegation of non-payment of stamp duty was not proved.