Increase rents at your own peril

Compliance of Income Tax Act by landlords should not, in  any manner imaginable,  translate to rent increase, writes MORRIS ARON

During the Budget statement last week, Finance Minister Njeru Githae made a routine directive requiring landlords to comply with income tax requirements.

By tightening the loopholes against landlords the Treasury is looking to raise a further Sh90 billion.

What Githae did not envisage at the time of making the statement is the gravity and the implications of intentional misinterpretation of the ‘borderless’ directive.

According to the directive, landlords earning more than Sh10,000 from rental houses — both commercial and residential — will be charged income tax at the prevailing Pay As You Earn (PAYE) rates.

Barely a day after the budget statement, unscrupulous landlords sent notices to tenants of commercial and residential properties — especially in the lower end of the market with the intention of increasing rent due to ‘an increase in tax.’

To show the level of discord in the real estate industry as a result of the directive, it took the Institution of Surveyors of Kenya (ISK)—the body that brings together estate managers, valuers and surveyors, — to disagree with landlords on increasing rent due to the directive.

?“We can confirm than some landlords have already issued notices to tenants with a view of increasing rent citing income tax. This has created panic in some areas,” said Collins K’Owuor, the chair of ISK.

?“We wish to categorically state that this is wrong as income tax is not a new cost but one that has always been there only not fully adhered to.”

?But even as ISK takes the people who employ them head on, in another corner—at the Consumer Federation of Kenya (CofeK), it  was more than seething with concerns over the directive.

For a lobby group that started as an umbrella body of mostly tenant residents’ association, the chair Stephen Mutoro did not mince his words over the issue.

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