Kenya Revenue Authority tightens noose on landlords

By Morris Aron

Landlords who have not been remitting rental income tax to Kenya Revenue Authority (KRA) stand to lose up to 30 per cent of their yearly income plus a possibility of penalties and interest after the taxman vowed to pursue evasive property owners.

This follows last week’s announcement by KRA to aggressively fish out landlords who have not been remitting rental income tax as required by the law as the taxman seeks to shove up tax revenue.

Kenya Revenue Authority Commissioner General John Njiraini says all landlords must comply with the law [Photo: File/Standard]

"Rental income is taxed like any other income and it normally ranges between 28 to 32 per cent of the net income," said Nikhil Hira, a tax expert at Deloitte.

According to those who understand tax matters, landlords who will bear the taxman’s wrath the most, are those with rental property in the middle and low-income areas where most tenants pay cash and as such hard to trace.

In the high-end, landlords will have a difficult task of hiding their rental income from the taxman as most tenants tend to pay in cheques.

John Njiraini, the KRA Commissioner-General said the outfit was preparing a register of all properties in major towns after reports that a significant number of the landlords are not paying taxes despite receiving rental income every month.

Property owners appear cornered after Njiraini said they had even identified properties that are notorious for not remitting rental income tax as required by the law.

"We have sent out demand letters to the concerned owners and would like to warn others that unless they pay up, we will catch up with them and they will pay not only the taxes due but also penalties and interest," said Mr Njiraini.

Heighten inflation

Property analysts say some landlords may resort to increasing rent to off-set taxman’s demands, a development that is bound to create social upheavals especially in the low end of the economy, heighten inflation trends and dim economic growth prospects.

The decision to go after landlords comes as a double blow to the real estate sector, which latest statistics indicate that is going through a rough patch with the current high interest rate regime.