KENYA Law and Practice Contributed by: Anne Kinyanjui and Bonface Abuya, DLA Piper Africa, Kenya (IKM Advocates)
is approved, the NLC maps out and values the land. (d) The NLC then publishes a notice of intent in the Kenya Gazette and the County Gazette, and delivers a copy of the notice to the land registrar and any person interested in the land. (e) On receipt of the notice, the land registrar makes an order restricting further dealings on the affected land until it vests in the state agency. The land registrar also makes an entry in the register of the intended acquisition. • The inquiry stage: (a) At least 30 days after publishing the notice, the NLC publishes another notice in the Kenya Gazette announcing the date of an inquiry to be conducted by the NLC. (b) Before the date of the inquiry, the interested persons submit their written claims for com - pensation to the NLC. (c) On the hearing date, the NLC examines the interested persons to confirm their proprietary interests in the land and hears claims for com - pensation. • The post-inquiry stage: (a) After the inquiry, the NLC prepares a written award in favour of the interested persons and serves a notice of the award on each interested person. (b) Upon acceptance of the award, the NLC promptly pays compensation to the entitled persons within one year of taking possession of the land. Compensation may be monetary or otherwise, including land swaps. • Possession and vesting: (a) After an award has been made, the NLC may take possession of the land by serving a notice to each interested person and the land regis - trar, specifying the day of possession. The title then vests in the national or county government (as the case may be). (b) Upon taking possession and payment of just compensation in full, the land vests in the national or county governments, free from encumbrances. (c) The landowner is required to deliver the title documents to the land registrar for cancella - tion if the whole land has been acquired, or for registration of the resultant parcels and issue
of their titles if only a portion of the land is acquired.
Disputes may arise around valuation methodology, delay in payment or whether the acquisition steps were strictly followed. 2.10 Taxes Applicable to a Transaction Taxes in Direct Sale of Real Estate Capital gains tax (CGT) and stamp duty are applicable in real estate transactions. CGT is paid by the seller at a rate of 15% of the net gains received upon sale of the immovable property. Stamp duty is paid by the purchaser at a rate of 2% of the value of the property if located in a rural area, or 4% of the value of the property if located in an urban area. The Income Tax Act, Chapter 470 prescribes transfers exempted from CGT, including the transfer of property to a registered family trust. Similarly, the Stamp Duty Act prescribes transfers that are exempt from stamp duty, including transfers to first-time homeowners under the AHS. The Value Added Tax Act (the “VAT Act”) exempts the sale of land or residential premises from VAT. However, the sale of commercial premises is not exempt from VAT. In addition, transfer of a business as a going con - cern is now classified as a supply exempted from VAT. Transfer of an income-generating real estate property could be classified as a transfer of an asset that con - stitutes a going-concern business, which is exempt from VAT, although this depends on the facts and should not be assumed automatically. Taxes in Sale of Real Estate by Way of Shares Where real estate is purchased by way of the acquisi - tion of shares in a land holding company, stamp duty will be paid by the purchaser at the rate of 1% of the value of the acquired shares. The seller will pay CGT at a rate of 15% of the net gain on the transfer of shares. In instances where the holding company is incorpo - rated outside Kenya, CGT will still be payable where the shares or comparable interest derive more than 20% of their value directly or indirectly from immov - able property in Kenya.
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