Treasury Shields KRA in Race to Net Unpaid Property Taxes

The National Treasury has introduced bold measures to bolster the Kenya Revenue Authority's (KRA) efforts to recover unpaid property taxes, marking a significant step in enhancing tax compliance and boosting revenue collection. In a strategic move to streamline the process, the Treasury has eliminated stamp duty on properties seized by the KRA as security for unpaid tax liabilities, easing the financial burden on the tax authority and facilitating smoother property transfers.

This initiative, embedded in the Finance Act 2025, amends the Tax Procedures Act to exempt stamp duty in two key scenarios: the registration of KRA's charge over a property and the subsequent transfer of that property under a settlement plan. By removing these transactional costs, the Treasury aims to empower the KRA to recover unpaid taxes more efficiently through structured agreements with taxpayers. The change addresses a previous gap in the law, which allowed the registrar to list a KRA notification as a restraint on property without charging a fee but did not clarify whether stamp duty was applicable.

Stamp duty, a mandatory tax on property transfers in Kenya, is typically levied at four percent of the property's market value in urban areas and two percent in rural areas. Non-payment of this duty can result in a fine of five percent of the principal stamp duty for every quarter from the date of the registered transaction. By waiving this cost for KRA-seized properties, the Treasury ensures that the tax authority can focus resources on recovering outstanding taxes rather than incurring additional expenses.

The impact of this policy is already evident. Property tax collections have surged by an impressive 95 percent in the 2023/24 financial year, rising from KES 42 billion to KES 82 billion. This remarkable growth underscores the effectiveness of the KRA's intensified efforts to address tax arrears, supported by the Treasury's legislative backing. The Finance Act 2025 further stipulates that when a taxpayer and the KRA agree on a payment plan, the tax liability must be settled within the agreed timeframe before the KRA's notification on the property is lifted, ensuring a structured and enforceable recovery process.

Analysts have praised the move, noting that it enhances the KRA's ability to enforce tax compliance while reducing financial barriers in the recovery process. The exemption also aligns with existing provisions for other transactions, such as transfers of land to charitable organizations, between spouses, or within families upon the death of a property owner. These exemptions reflect a broader policy of balancing revenue collection with social considerations.

The Treasury's support comes at a time when the government is under pressure to meet ambitious revenue targets. For the 2022/23 financial year, the KRA was tasked with collecting KES 2.14 trillion to support a KES 3.3 trillion national budget. The authority to sell properties of tax defaulters, granted under the Finance Act 2022, allows the KRA to dispose of assets through public auctions or private treaties within two months of notifying the taxpayer. Targeted assets include land, buildings, aircraft, ships, motor vehicles, or any other property deemed sufficient to cover unpaid taxes.

This latest policy shift demonstrates the government's commitment to strengthening tax administration and ensuring fiscal sustainability. By shielding the KRA from additional costs and streamlining the recovery process, the Treasury is paving the way for more effective enforcement of tax obligations, ultimately benefiting Kenya's economic growth and public service delivery.