For a tenant who hasn’t paid rent, Nairobi automatically transforms from the “green city under the sun” to the concrete jungle of hardships (shamba la mawe).
Tenants become experts in playing hide-and-seek with their landlords.
Yet landlords appear to be masters of the hide-and-seek game when it comes to paying taxes on rental income that for over a decade now, the Kenya Revenue Authority (KRA) has been unable to master how to properly net this large bracket of taxpayers.
Not even tax amnesties such as the one KRA issued in 2015, have helped in this potentially fruitful endeavour.
KRA in a notice, has once again announced another attempt to get landlords on board through an exercise starting on Wednesday.
“KRA will undertake a data collection exercise on rental properties within Nairobi City County and Nairobi Metropolis as part of its tax base expansion programme from October 19, 2022,” says the public notice.
It adds that KRA officers conducting the exercise will identify themselves using KRA identification cards which can be verified online - through the KRA M-Service App or using KRA Thibitisha hosted on the taxman’s website.
“Members of the public are requested to cooperate and provide the information required during the exercise,” the notice signed Commissioner for Domestic Taxes adds.
Seven years ago (2015), KRA issued a notice to landlords with the hope that it will increase compliance. The public notice provided amnesty to landlords who will file their 2014/15 rental income taxes.
The amnesty provided a 100 per cent waiver on principal taxes and penalties accrued. The then KRA Commissioner General John Njiraini said one of the targets in that amnesty is real estate companies.
This, he said, will enable them to add to their system a sizeable number of landlords.
Strategy not leniency
“We are likely to also bring in real estate companies. Real estate companies manage and collect rent for their clients,” he said.
Mr Njiraini stated that amnesty was a strategy and not leniency to the landlords.
“It is important to put to rest particular issues. And this issue has been thematic for a long time. And there is a particular reason it has been a problem. We need to resolve it so that we bring people on board. It is not about leniency but strategy,” said Njiraini.
In June 2012, KRA compelled landlords to start paying income tax on rent.
Then, a survey by Ipsos showed both tenants and landlords were reluctant to this move. The tenants were afraid of an increase in rent prices while landlords did not, and still do not want interference with their income.
Tax on rental income is calculated as 10 per cent of gross annual (income) which is at least Sh288,000 according to the law that stipulates taxable income.
Kenya Power meters
Data for KRA has always been a challenge which explains the ongoing exercise in Nairobi City County and Nairobi Metropolis. KRA has also partnered with Kenya Power to net more landlords through the meters.
Ideally, if a landlord has 10 units, they are likely to purchase 10 pre-paid meters and they will be registered under their names.
As such, KRA, through this information, is able to map out where the units are located and hence have that particular landlord on their radar.
If data from the Kenya Bureau of Statistics (KNBS) is to be relied on, then seven out of 10 households (70.29 per cent) living in a rental house in Nairobi pay rent to an individual landlord.
Some 4.42 per cent pay to a private company. This is according to the 2019 census. The report shows that there are 12,040,791 households, with 61.3 per cent of these living in their own houses.
In Nairobi, households that live in their own houses are just five per cent while 79.3 per cent are renting from individuals.
Some of the details KRA may be looking for from tenants as it has done before to net more landlords in the tax bracket include the full names of their landlords, their national identification number (ID Number), and their KRA pin number.
Others are postal address, telephone number, Land Registration (LR) number, number of bedrooms, rent payment methods, landlord’s bank account and branch.