KRA targets Sh3b in tax waiver bait to landlords

The taxman is targeting to collect Sh3 billion through a fresh amnesty that could also net 20,000 small landlords this financial year.

The new measures are an incentive that promises to waive backdated taxes, interest and penalties that accrued to property owners till June last year in a sector Kenya Revenue Authority (KRA) says reports very poor compliance levels.

Kenya Revenue Authority Commissioner General John Njiraini during a media briefing on tax amnesty campaign on rental income. (PHOTO: FIDELIS KABUNYI/STANDARD)

“It is the very first time we have taken this extraordinary step to waive principle taxes to enable us move forward,” Commissioner General John Njiraini said yesterday.

Landlords will, however, need to pay 10 per cent of the rental income received in 2014 and 2015 as taxes to qualify for the waiver. In the past, individual landlords were required to pay taxes on their rental income at a graduated scale similar to Pay-As-You-Earn, but also allowed for the deduction of expenses – which is thought to have complicated and encouraged non-compliance.

Foregoing the back taxes accrued until 2013 is anticipated by the KRA top brass to be sufficiently attractive to entice landlords to enter the tax base. Failure to file the returns within the 10-month window to June 2016 would lead to payment of all back taxes, Njiraini warned.

His agency is struggling to raise additional revenues to meet revised targets and the rising public spend, to inform the latest attempt. KRA expects to have netted over 60,000 landlords into the tax bracket by 2018 to further increase the tax base in the real estate sector.

“This amnesty will enhance compliance levels as well as improve accuracy in declaration of rental income. As the new regime is based on gross and not net income, payment of taxes has been made simpler. More so, this is based on collection of information rather than collection of revenue,” he added, explaining that the targeted landlords have property in the middle class estates and informal settlements.