KRA moves to enforce payment of rental income tax
Posted Thursday, July 12 2012 at 20:24
Campaign starts on Friday, July 13 at Times Tower, Nairobi before moving to other parts of the country later this month.
The campaign will be backed by links on the KRA website to pages dedicated to enquiries on rental income and reporting of tax evaders.
The Consumers Federation of Kenya (Cofek) had threatened to go to court to block the process but it has since shelved these plans on legal advice.
“Our lawyers advised that our argument that the tax would be exploited to increase rents would not hold in court,” said Cofek chief executive Stephen Mutoro.
Mr Mutoro, however, said Cofek was still opposed to the move but hoped KRA would consult widely to ensure that tenants do not suffer. The expansion of the tax net will also see churches taxed in future for income from their business undertakings.
The taxation of rental incomes is part of KRA’s effort to meet the high revenue collection targets set by the Treasury to finance the Sh1.45 trillion national Budget.
KRA estimates that landlords constitute the single largest group of business people whose income is untaxed, and plans to raise Sh90 billion in the current financial year through the proposed measures.
The rental tax will be paid by all landlords earning more than Sh10,000 per month from rent and graduated according to the Pay As You Earn scale.
The law on property taxes came into effect in 2007 but its enforcement has been hampered by logistic challenges.
Although many owners of properties being managed by professionals are already paying tax, it is estimated that tax was not being paid for 60 per cent of buildings in the city.
The tax evaders are mainly those who collect the rent themselves or had outsourced the work to unregistered property agents.
Property developers will also part with a share of their income as KRA through a liability tax on individual directors of real estate firms intends to ensure compliance with the law.