The taxman will have to go back to the drawing board and find new ways of getting landlords into the tax net. This is after only 1,000 house owners took up the amnesty offered in the first nine months of the year.
The Kenya Revenue Authority (KRA) said 1,000 landlords have so far volunteered to take up the amnesty that expires in June after giving the taxman Sh130 million in taxes.
This is a far cry from the 20,000 landlords the taxman is targeting in the nationwide tax amnesty campaign that targets to raise Sh3 billion from the sector annually.
The campaign aims to create awareness and enhance voluntary compliance among landlords. The tax amnesty is valid from July 1, 2015 up to June 30, 2016. KRA Commissioner General John Njiraini said his agency is now in talks with Equity Bank and Safaricom to make it easy for landlords to pay tax.
“Equity Bank will help us broaden the rental income base by allowing landlords to pay taxes easily. We are developing a mobile application that will also make it easy for them to pay via Mpesa,” Njiraini said.
But the slow uptake of the amnesty now means the taxman will have to come up with a better strategy to go after the non-compliant landlords. KRA has warned that landlords who fail to fully disclose the tax due during the amnesty period will be subjected to compliance audits and tax payment enforced as per the law. Landlords who take advantage of the amnesty window to get their tax records in order will receive 100 per cent waiver on principal taxes, penalties and interest from 2013 and prior periods.
For 2014 and 2015, they will receive a 100 per cent waiver on penalties and interest, but will have to pay the principal taxes.
“In addition, landlords who take up the opportunity will not be subjected to tax compliance checks or audit for 2013 and prior, 2014 and 2015 if they fully disclose undeclared rental income,” KRA said in a statement on its website.
Further, where expenditure records are not available, landlords would be allowed a deduction of 40 per cent of gross rental income as expenditure. “The aim of this campaign is to encourage landlords who have not been paying tax to declare and voluntarily pay any undisclosed tax,’’ said Mr Njiraini.
KRA has so far netted a total of 20,000 landlords into the tax bracket and was targeting to bring on board another 20,000 this financial year (2015-16) as part of the tax amnesty campaign.
Njiraini observed that the real estate sector in Kenya has witnessed an annual average growth rate of 7.2 per cent in the 2008-2014 period. Despite this significant growth, there has been no corresponding tax revenue increases.
He singled out the high cost of compliance, complexity of the tax system, poor record keeping and huge back taxes as key factors hindering voluntary tax compliance among property owners.