Legal Definitions - stamp duty

Stamp duty is a government tax imposed on specific legal documents or transactions. Historically, this tax was collected by requiring a physical stamp, purchased from the government, to be affixed to the relevant document. While the name "stamp duty" persists, the payment process today is often electronic, but the core principle remains: it is a charge applied to certain official or commercial papers to generate revenue for the state.

Here are some examples of how stamp duty applies:

• Buying a Home: When an individual purchases a house, they typically pay stamp duty to the government. This tax is usually calculated as a percentage of the property's purchase price and is due when the legal document transferring ownership (the deed) is registered.

  This illustrates stamp duty because it is a tax levied on the transaction of transferring property ownership, formalized by a legal document, and contributes to government revenue.

• Signing a Commercial Lease: A business entering into a long-term lease agreement for office space might be required to pay stamp duty on that lease. The amount could be based on the total rent payable over the lease term or a fixed fee, depending on the jurisdiction.

  This demonstrates stamp duty as a tax applied to a formal commercial agreement (the lease document) that grants rights to use property, generating revenue for the state.

• Transferring Company Shares: If an investor sells shares in a private company to another person, stamp duty may be payable on the transfer. This tax is often calculated as a percentage of the value of the shares being transferred and is due when the change of ownership is legally documented.

  This shows stamp duty as a tax on the transfer of ownership of financial assets, evidenced by the share transfer document, contributing to government funds.