KRA widens rental tax net to capture big-time landlords

The Kenya Revenue Authority (KRA) has cast its rental-tax net wider to include landlords and property owners with annual incomes surpassing the Ksh. 10 million mark.

The big-time proprietors will now be required to make appropriate payments for their annual incomes along with the full disclosure of the gross revenues while filing returns.

“Residential property owners earning more than Ksh. 10 million per year and owners of commercial property are required to declare the rental income in their annual income tax returns and make appropriate payments,” KRA said in a public notice on Friday.

Landlords with annual incomes above Ksh.10 million were originally exempt from paying rental income tax charged at 10 percent of gross rent received. The levy is paid either monthly, quarterly, semi-annually or annually with returns being filed monthly.

The tax is payable on or before the 20th day of the month with non-compliance in filing attracting a penalty of 5 percent of due tax with a cap of Ksh. 20,000 while delayed payments further attract an interest of 1 percent for each month.

Introduced first in January of 2016, compliance for rental tax has been on the downside prompting KRA to double-down its enforcement efforts.

The revenue authority has for instance deepened its engagement with property owners to tackle compliance issues which range from poor book keeping, complexity in the previous tax system and the general lack of awareness.

This even as the authority comes under increasing pressure to meet its set revenue collection targets by Treasury.

KRA is for instance expected to collect a total of Ksh. 1.7 trillion in the fiscal year ending June 30, 2019, this to increase tax revenue as a share of Gross Domestic Product (GDP) to 17 percent to offset the reliance on debt as a budget funding instrument.