The National Treasury has moved to end exemptions on stamp duty payment, coming on the backdrop of a fallout from reliefs granted to NCBA Group following the merger of NIC Bank and CBA in 2019.
The waiver of stamp duty on the transaction proved controversial and was criticised by the current administration before its quashing by the High Court last month.
Fresh proposals contained in the draft Finance Bill, 2025, are all expected to end exemptions from stamp duty if adopted by Parliament.
“The Income Tax Act is amended by repealing section 131,” notes the fresh proposal.
Stamp duty is a tax levied on legal instruments such as cheques, receipts, military commissions, marriage licenses, land transactions, and shares.
The Treasury, during the tenure of President Uhuru Kenyatta, exempted the merged CBA and NIC Bank from paying the share transfer tax that ran into the hundreds of millions of shillings.
Former Treasury Cabinet Secretary Henry Rotich issued the exemption on the transfer of CBA shares into NIC Bank from paying the one percent stamp duty.
The merger took place via a share swap between the two banks where NIC group shareholders took a 47 percent stake in the merged entity-NCBA while CBA shareholders, who include the Kenyatta Family, took up a 53 percent share of the new bank.
The value of the 53 percent stake was estimated at Sh35 billion based on a book value of Sh65 billion which placed the stamp duty charge at more than Sh350 million.
The transfer of unquoted shares like CBA attracts a one percent stamp duty but the sale of quoted shares is exempt from tax.
The exemption of duty drew sharp criticism with the waiver being deemed as favoritism given the close links between NCBA principal shareholders and the government of the day.
In early April, Justice Chacha Mwita quashed the stamp duty exemption saying the decision to exempt the bank was not made in public interest.
The judge said the interest exhibited in the letter from the bank seeking exemption was more private than in public interest.
“Having considered the issues raised, I come to the conclusion that the exemption was not made in the public interest and thus violated the principle in section 106 of the Stamp Duty Act, so that the discretion conferred by that section was not properly exercised,” said the judge.
NCBA which previously indicated it would pay the duty once obliged by the courts said it would continue its fight to preserve the exemption through the Court of Appeal.
Busia Senator Okiya Omtatah challenged the exemption arguing that Kenyans would lose millions from the waiver which he alleged was done secretly.
The lender noted that its application for exemption to the National Treasury Cabinet Secretary was supported by the Lands counterpart and that it was made in good faith and in compliance with the law.
“The decision to appeal against the High Court judgement is based on the belief that the Group procedurally secured the exemption in the interest of the public, and we tend to exhaust all available legal options to uphold this position,” NCBA said in a statement.
The new administration under the stewardship of the then National Treasury CS Prof. Njuguna Ndung’u reversed the exemption in March 2023 and asked the Kenya Revenue Authority (KRA) to collect Sh384.5 million from NCBA.
The move promoted the bank to rush to court where it obtained a temporary order, stopping the collection of taxes.
NCBA said that the National Treasury had previously been satisfied that NIC and CBA had met the conditions for the grant of exemption from payment of stamp duty with respect to the transfer of CBA shares from CBA shareholders to NIC Bank and the transfer of assets and liabilities from NCBA Bank to CBA as part of the hive-down and business amalgamation implemented as part of the merger.
The 2019 legal notice was deemed unconstitutional and invalid.
“A declaration that the decision to exempt the respondents in respect to the transaction that led to the merger of NIC and CBA from stamp duty violated the law and was therefore unconstitutional,” High Court judge Chacha Mwita said.
