KRA widens rental tax net to capture big-time landlords

KRA office located at Times Towers in Nairobi
File photo of KRA headquarters located at Times Towers in Nairobi. PHOTO| COURTESY

In Summary

  • KRA will now require landlords and property owners with annual rental incomes surpassing Ksh. 10 million to account for the rental tax charged at 10 percent of gross revenues.
  • The big-time proprietors have until now been exempt of the tax but have been incorporated into the levy as KRA comes under increasing pressure to meet its revenue collection targets set by Treasury.
  • KRA is expected to collect Ksh. 1.7 trillion by June 30th 2019 to increase revenue as a share of GDP to 17 percent as the government targets to bridge its debt funded budget deficit under ongoing fiscal consolidation.

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.

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Story By Kepha Muiruri
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