Industry News
Landlords Face New Difficulty as KRA Cracks the Whip
The taxman has sent compliance notices to over 100,000 landlords.
Kenyan landlords who are already contending with high construction costs and rising lending rates are facing a new curve-ball: an order from the Kenya Revenue Authority to pay rental income tax by the end month.
The rental income tax is changeable at a flat rate of 10 per cent and it targets individual landlords of residential houses that earn less than Sh10 million annually.
Last month, KRA began sending compliance notices to more than 100,000 building owners who have failed to remit their rental income taxes since January.
According to KRA acting commissioner for domestic taxes, Ruth Wachira, the taxman had sent compliance notices to 12,000 landlords as of February 7, and the number was expected to rise to over 100,000 by March 31.
“As for those who fail to respond by the end of March, KRA intends to estimate residential rental income tax due from the property information available and take enforcement measures provided in the law,” said Ms Wachira.
Some of the measures that KRA can take to enforce compliance include asking tenants of the affected landlords to pay rent directly to the taxman until the debt is fully settled, drawing cash from the landlord’s account, and, in extreme cases, auctioning the property.
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The taxman has recently been collecting data on landlords in Nairobi and plans to use the information to calculate the rental income tax due.
The information, which is mainly being gathered from tenants, includes the landlord’s name, postal and telephone contacts, details of the property, and rental receipts for the units.
KRA has already covered sections of the city centre, Donholm, Lang’ata, Ngong Road, Zimmerman, Dagoretti, and Imara Daima estates – and it expects to cover the entire city of Nairobi by June this year.
The State last June introduced rental income tax changeable at a flat rate of 10 per cent aiming to collect Sh10 billion annually. The move has caused panic among landlords who are now rushing to comply with the law.