Anxiety as KRA Intensifies Hunt for Defaulting Landlords

Panic has gripped a section of landlords following an announcement by the Kenya Revenue Authority (KRA) that it was mounting a massive crackdown on property owners who are defaulting on taxes despite receiving monthly rental income.

The KRA said on Tuesday that it had so far enlisted a total of 52,000 landlords against a target of 100,000 even as it warned non-compliant landlords of heavy penalties.

“We have recruited 52,000 new landlords against our target of 100,000 and are collecting Sh400 million on average each month, or Sh4.8 billion a year,” KRA real estate manager Alice Kiptoo said on Tuesday.

Ms Kiptoo, who was speaking during a media sensitisation workshop on Rental Income and Capital Gains Tax in Nairobi, said the taxman had partnered with the Kenya Bureau of Statistics, Kenya Property Developers Association and the Ministry of Lands, Housing and Urban Development to smoke out defaulters.

“Our target is to recruit 20,000 new landlords in the financial year 2016/2017,” she said.

According to the KRA, landlords owe the taxman Sh50 billion in back taxes, penalties, and interest payments.

RELATED: Landlords Face New Difficulty as KRA Cracks the Whip

Deputy Commissioner for Domestic Taxes James Ojee said that KRA will descend hard on landlords who have failed to take advantage of the June 1, 2015 to June 30, 2016 amnesty, and it will audit back taxes payable, which would raise the figure significantly.

“If you go to our database, the debt portfolio is Sh50 billion but that includes principal, interest and penalties accumulated over time,” Mr Ojee said.

The rental income tax, which was introduced by the Finance Act 2015, is charged at a flat rate of 10 per cent of the monthly rent received from tenants, and it targets individual property owners receiving less than Sh10 million a year.

Those who fail to remit tax on rental income by the 20th day of the subsequent month face a charge of 20 per cent on the defaulted tax as well as a Sh20,000 penalty every month.

The taxman has recruited 800 agents countrywide to withhold 10 per cent of landlord’s rent as a tool of netting more taxpayers.

Join 15,000+ pros getting our weekly digest of news and insights.