The Kenya Revenue Authority (KRA) has stepped up efforts to move into estates in search of landlords who have not been paying rental income taxes from the rents they receive from tenants.
On November 3, the KRA sent a notice to property owners of the expansive Nyayo Estate in Nairobi, in what will also culminate into a rigorous data collection exercise.
Nyayo Estate, a gated community built by the National Social Security Council with 4,774 units, is a perfect candidate for the taxman’s latest efforts to rope in more landlords, partly due to its formal ownership structure.
“This is to confirm that KRA will conduct a sensitization exercise to create awareness on the monthly rental income at Nyayo Estate Embakasi-Malaika Park Gate D on 11.11.2023 at 9.00 am and thereafter undertake data collection exercise on rental income properties,” reads part of the notices undersigned by KRA’s chief manager in charge of rental income.
“Kindly take note that it is mandatory to comply with the requirements of the Public Notice and KRA legal statutes on the provision of records to KRA as per section 24 & section 59 of the Tax Procedures Act and we look forward to a smooth operation,” added the KRA.
The law requires landlords with annual rental income of between Sh288,000 (Sh24,000 per month) and Sh15 million (Sh1.25 million per month) to file a monthly tax return declaring the gross earnings rent from which tax is computed at the rate of 7.5 percent.
With the government fast running out of options to tax, the booming property market has been seen as a low-lying fruit by the administration of President William Ruto. Consequently, new measures have been put in place to optimize the collection of rental income tax.
In the Finance Act, 2023 property agents are required to deduct and remit rental income tax within 24 hours after receiving the payment from tenants.
The new law has also introduced the withholding tax rental income collected by agents appointed by the KRA commissioner in charge of domestic taxes.
Initially, landlords were required to pay the money on the 20th of every month. However, the new proposal requires agents to remit the tax within 24 hours of receiving the tax payment.
Rental income is one of the tax heads that the administration of President William Ruto will be relying on to finance its Sh3.93 trillion budget in the Financial Year 2023/24.
“Implementation of rental income tax measures by mapping rental properties. This will be achieved through enhanced field data analysis mopping up, integration of iTax (system) with the National Lands Information Management System and use of a mobile App,” said the Treasury in the budget documents.