The Government of Kenya has abolished payment of capital duty on the initial nominal capital of a company on incorporation. This will apply to new incorporation of local subsidiaries of local companies.
Previously, the promoter of a company was required to pay ad valorem stamp duty fees on the nominal capital of the company under section 39 of the Stamp Duty Act. The stamp duty varied according to the amount of nominal capital of the company and was calculated at 1% of the nominal capital of the Company. Section 39 of the Stamp Duty Act provides:
A statement of the amount which is to form the nominal share capital of any company to be registered with limited liability shall be delivered to the Registrar of Companies and a statement of the amount of any increase of registered capital of a company now registered or to be registered with limited liability shall be delivered to the Registrar, and every such statement shall be charged with an ad valorem stamp duty.
This provision effectively made it a requirement for payment of stamp duty to the government before incorporation of the company.
On April 12, 2016, the Cabinet Secretary to the National Treasury, exercising his powers under section 106(1) of the Stamp Duty Act and on recommendation of the Cabinet Secretary for Land, Housing and Urban Development, directed that the initial nominal share capital of a company registered or to be registered with limited liability shall be exempt from the ad valorem stamp duty charged under section 39 of the Act through Legal Notice No. 60 dated April 11, 2016. The Legal Notice provides:
IN EXERCISE of the powers conferred by section 106 (1) of the Stamp Duty Act, the Cabinet Secretary for the National Treasury, on the recommendation of the Cabinet Secretary for Land, Housing and Urban Development, directs that the initial nominal share capital of a company registered or to be registered with limited liability shall be exempt from the ad valorem stamp duty charged under section 39 of the Act.
The short link to the Legal Notice is http://kenyalaw.org/kl/index.php?id=6128.
This directive came to effect immediately and investors are now no longer required to pay stamp duty to the Government on the initial capital of the company at the point of incorporation of the company.
This exemption is a great incentive to investors who wish to establish limited liability companies in Kenya. It is recommended to establish the company with the highest possible level of nominal capital depending on the foreseeable requirements for the company as subsequent increases of capital will be subject to ad valorem stamp duty at 1% of the amount of the increase as this is not exempt under the Legal Notice.
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