Taxes collected on the transfer of real estate and shares in privately-held firms in the six months ended December rose 16.16 percent, signalling an uptick in earnings from property deals.
Tax receipts from property transactions amounted to nearly Sh8.76 billion in the review period compared with Sh7.54 billion a year earlier, National Treasury data shows.
Firms and households selling land, buildings and unquoted securities such as shares in privately-held companies pay five percent capital gains tax on net proceeds, with defaulters slapped with a 20 percent penalty of the tax due.
Buyers, on the other hand, are charged a stamp duty at the rate of four percent of the value of property in towns and two percent in rural areas, while rate for unquoted shares is one percent.
Property taxes are a major source of revenue for the government, with the Treasury a couple of years ago implementing rules aimed at hastening processing of the deals.
Treasury secretary Ukur Yatani in July 2020 gazetted regulations which allow chief government valuer to appoint private practitioners to conduct property valuation on behalf of the government in a bid to shore up property tax receipts this financial year.
The Stamp Duty (Valuation of Immovable Property) Regulations give property buyers the option of either using civil servants or hiring an approved valuer, shortening the turnaround period.
“By excluding private valuers from valuations for stamp duty, transfers of immovable property (land) have always suffered avoidable delay, since government valuers have had challenges coping with the routine workload,” Ibrahim Mwathane, the chairman for privately-run Land Development and Governance Institute, told the Business Daily in a past interview.
“If the regulations are effectively implemented, one would expect a reduction in the turnaround time for transfer transactions countrywide, since there will be more valuers available to deal.”