Unregistered agents face arrest in war on tax-evading landlords
Eunice Macharia, Board Chair, Estate Agents Registration Board (EARB) at a past event on September 29, 2023, at The KICC, Nairobi. PHOTO | BILLY OGADA | NMG
The government has threatened to arrest and prosecute property agents practising without permits in an ongoing campaign to net more taxes from the real estate sector.
The Estate Agents Registration Board has warned landlords against procuring services of unregistered agents to avoid disruptions in services at their property.
“In order for the EARB to continue protecting the interest of the public and enhance professionalism in the real estate sector, consumers are advised to deal with registered estate agents only,” Hellen Abuya, the board’s registrar, said in a notice.
The notice has come at a time when the Treasury has pledged more funds to facilitate enhanced registration of agents to help report landlords who are not remitting rental income tax to the Kenya Revenue Authority.
The Estate Agents Act requires practitioners to register with the board and be issued with an annual practising certificate.
Registration of estate agents is open to full members of the Institution of Surveyors of Kenya practising in valuation and estate management, building and land management, or a holder of a degree, diploma, or licence from a university or college recognised by the board.
The board can also register a member who does not have the aforementioned qualifications if it is satisfied that he or she is of good character and has not been convicted of fraud or dishonesty, amongst other qualifications.
A person practising as an estate agent without requisite registrations faces a fine of as much as Sh20,000 or a jail term of up to two years or both upon conviction under the law.
The Treasury has sounded an alarm over low compliance levels amongst landlords in filing and reknitting taxes to the KRA even after the process was “simplified”.
Residential property owners generating an average monthly income of between Sh24,000 and Sh1.25 million are under the “simplified” process required to pay tax at the rate of 7.5 percent of the gross earnings.
The current rate took effect in January following changes in the Finance Act 2023 that lowered it from the previous 10 percent.
“The simplification was introduced to enhance compliance. Though it has increased the number of taxpayers, it has not achieved the envisaged compliance [in remitting rental income tax],” Treasury wrote in the 2024 Budget Policy Statement.
“To address compliance challenges in rental income taxation, the government will enhance the registration of property agents, mapping of properties, and leveraging on technology. In this regard, and to ensure fairness and equity, the government will review taxation of residential rental income.”
The enhanced use of agents will complement the block management strategy, a mapping technology being implemented by the KRA to identify landlords who are tax-compliant, and those not in the tax net and detect new buildings coming up.
The KRA’s geographic information system (GIS)-supported block management strategy involves assigning tax service officers to specific residences, into blocks and sub-blocks for better mapping of landlords.
Latest data shows KRA had 76,025 real estate owners by June 2021, a 29 percent growth over 58,934 property owners in June 2018.
The plan to enhance the registration of property agents to drive compliance in residential rental income follows the recruitment of 1,400 paramilitary revenue officers last year, largely targeted at increasing compliance amongst small traders in informal settings.
The courts have, nonetheless, declared the process applied to employ the revenue officers null for heavily favouring two tribes at the expense of the remainder 41.
Times Tower also relies on its capability to feed financial transactions of individuals and businesses from third parties into its Data Warehouse and Business Intelligence (DWBI) platform to catch tax-evading property owners.
The revenue agency has in the past backed access to third-party data from banks and utility providers as “instrumental in the identification of the landlords”.
