Property Transfer Tax (PTT) – The Tax that Applies to Property Transactions

This is a two part article on Property Transfer Tax, an important tax that is applicable to property transactions. Last month we covered part 1 of this series. Last month we introduced property transfer tax (PTT) as a tax that applies to the sale of property. It is currently 5% of the value of the property. It is usually paid by the seller but it is becoming more common for this tax to be passed onto the buyers so
important that parties negotiate and agree upfront who bears this cost. Click here if you missed it and would like to read it or if you simply want to refresh your memory.

When is PTT paid?
PTT is usually paid towards the end of the transaction when the property has been paid for completely, specially if the property is in a large development. For individual property sales, it is more common for PTT to be paid soon after the deposit has been put down, on the understanding that the buyer will soon finish paying the balance of the purchase price.

Why is PTT important?
Aside from it being a mandatory tax payable on the sale of property, as a buyer you will not be able to process title deeds in your name without evidence that PTT was paid. This evidence is provided in the form of a PTT Clearance Certificate which is required when lodging your documents for title at Ministry of Lands.

Are there exemptions to paying PTT?
There are a few exceptions to paying PTT. Where you transfer a property to your immediate family iwill not attract PTT. “Immediate family” is a spouse, child, duly adopted child or step-child. Note that it doesn’t include a “parent” or a first cousin, aunt or uncle. Another situation that may call for an exemption is where you own property and you are transferring it into a company as your contribution to the equity of the company. It’s also important to note that the exemption is not automatic but has to be applied for and approved by ZRA.

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal or tax advice and should not be relied on as such. For legal or tax advice please contact a licensed legal or tax professional.

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