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Ian Odongoh- The Exemption from Stamp Duty for First Time Home Owners; the Pitfalls

By: IT Support October 30, 2020 no comments

Ian Odongoh- The Exemption from Stamp Duty for First Time Home Owners; the Pitfalls


Under the Tax Laws Amendment Act 2018, buyers of homes under the affordable housing scheme have been exempted from stamp duty obligation under their first home acquisition. The reporting by the media has focused on the exemption from stamp duty, causing a stir among persons who are planning on acquiring family homes.

However, taking into consideration the wording of the Act, and the ambitious targets that the Kenya Revenue Authority has set for itself, it is likely that a lot of the hopeful home owners, do not technically qualify for the exemption.

This article explores the Tax Laws Amendment Act 2018, the Housing Amendment Act among other laws, to appreciate the exemption from stamp duty. At the end, we hope that prospective home buyers will be guided on where they stand, and at the same time, it shall guide future home owners on the tax considerations with relation to the acquisition of their first homes.

The Tax Laws Amendment Act 2018

On 10th April 2018, the Leader of Majority in the National Assembly tabled what was then the ‘Tax Laws Amendment Bill 2018’. the Bill was passed by the house and later on signed into law on 18th July, 2018. It ushered in a raft of changes to the tax regime in Kenya, this article focuses on the change to the Stamp Duty Act (Cap 480 of the Laws of Kenya). The 2018 Act removed first time home purchases from the list of transactions that attract stamp duty under the law.

The amendment reads in part: “there shall be exempt from stamp duty under this Act; the purchase of a house by a first time home owner under the affordable housing scheme

Under the memorandum which presented the bill before parliament, the justification for the exemption was that it should serve as an incentive to 1st time home owners. Furthermore, it is introduced under the affordable housing scheme which is a government program being run under the Presidency’s Action Plan for the next five years.

Bearing in mind the above, we are able to appreciate the restrictive language applied under the amendment. For starters, the exemption is not designed to benefit those that have already bought homes. Secondly it does not reduce the tax burden of home buyers who aren’t acquiring their homes under the affordable housing scheme.



Exempt Not Exempted
“I have not bought a home before” “I have bought a home before, and wish to buy another one under the affordable housing scheme”
“The first home I wish to acquire, is being sold through the affordable housing scheme” “I haven’t bought a home before, and I am buying one that is not under the affordable housing scheme”


It is important to note that in any transaction creating a new interest in real property, stamp duty applies as the default position. What this means is that the law places a burden on the person claiming a relief to prove that their transaction is indeed exempted. Noting that the Kenya Revenue Authority, has given itself ambitious revenue collection targets, we wouldn’t be speculating to expect that before being granted a relief, home buyers will be required to strictly prove that they fall under the exempted transactions.

This leads to questions about what is a home under the Affordable Housing Scheme, and also what should count as a previous acquisition of a home?

The Affordable Housing Scheme

During the Jamhuri Day celebrations held on 12th December, 2017, His Excellency Uhuru Kenyatta listed his four key flagship areas in terms of the Country’s development. Among these was affordable Housing. The declaration was not anchored in any law, rather, a presidential proclamation of the direction that the administration would take in its second term.

The laws of Kenya are all but silent on what qualifies under the affordable housing scheme. There is yet to be a written set of regulations, anchored in law, that are meant to guide institutions such as the Kenya Revenue Authority to grant an exemption to a buyer under the scheme.

For instance, when a property owner seeks to transfer property held in their individual name, to a company wholly owned by family members (a transaction exempted under Legal Notice 92 of 2007) the exemption does not apply automatically, one has to apply to the collector of stamp duty for exemption. That application has to be accompanied by among other documents:

  • CR12 showing list of directors and shareholders in the company.
  • Documents showing the degree of family relationship between the shareholders disclosed in the CR12.

Noting what we have stated concerning revenue collection, presumably, the collector of stamp duty shall be very technical and restrictive when exempting transfers of homes from stamp duty.

The closest mention of affordable housing in the laws of Kenya is contained in the Housing Act.

The Housing Act Cap 117

This is a fairly outdated piece of legislation enacted in 1953. The objective of the law was to establish the Housing Fund as a facility that local authorities could borrow from to put up housing. It also established the          National Housing Corporation whose main functions were loaning money to local governments and bodies that would then utilise the funds in acquiring property and putting up dwellings.

Under the Housing Amendment Bill, 2017, the Act was amended enabling the Corporation to do things such as:

  • Maintain a database of low income urban dwellers.
  • Identify persons that are eligible for low cost housing.
  • Prescribe guidelines for the promotion of construction of low cost housing.
  • Providing tax incentives to housing investors that invest in low-cost housing.

The stipulations of the Housing Act fail to provide sufficient legal anchorage for what is qualified as affordable housing. The law should go a step further to define the specific type of documentation that developers supplying affordable housing should provide to the buyers, thereby demonstrating the exemption of their transactions from stamp duty. The guidelines should be sufficient to ensure that the law isn’t abused by other property purchasers who aren’t entitled to the incentive under the Act.

First time Home Owner

It remains to be seen whether previous transactions in land which may not have necessarily constituted acquisition of a dwelling, will be considered as owning a home. This is due to the fact that KRA will likely use an individual’s tax history to determine whether they are indeed a first time home owner.

Anytime a person acquires land, they are required to pay stamp duty. The transfer captures the PIN details of the buyer, and it is therefore fairly easy for KRA to single out the PINs of people with a history of acquiring property.

Whether it would be fair to deny such persons the benefit of an exemption, even when their past transactions were in relation only to vacant land without dwelling structures is not certain. In the event that KRA acts technically and deny the exemption to such persons who ‘don’t own a home’, it would be interesting to see the legal interpretation that our Judiciary shall attach to the phrase ‘First Time Home Owner’.


The exemption from stamp duty is a much needed relief for prospective owners who are yet to attain economic sufficiency. It should not however be abused to deny the country of much needed revenue by tax evaders whose financial means are above the average of the country. It therefore calls for involvement of stakeholders in the property value chain to ensure that the law is utilised to serve its intended purpose.