Taxman automates property deals levy to boost efficiency
What you need to know:
KRA collects stamp duty of between two and four per cent the value land as assessed by Land ministry. In January it reintroduced a capital gains tax of five per cent on property and asset sale.
Land experts welcomed the move but noted the need for a more detailed system that not only seals revenue leaks but also enhances other aspects of land transactions such as price comparability and owner verification.
Unpredictability and long manual process in the Lands ministry have been cited as causes of high interest rates.
The Kenya Revenue Authority (KRA) is automating tax payment for property deals to boost efficiency.
The tax collector expects stamp duty and capital gains tax-associated transactions on land to be paid through its online iTax platform from March. The automation process will connect land registries to KRA’s online system.
“We expect to significantly reengineer the property transfer process and substantially cut down on the time and effort the public spends in undertaking property transfers,” said commissioner general John Njiraini.
The KRA collects stamp duty of between two and four per cent the value land as assessed by Land ministry. In January it reintroduced a capital gains tax of five per cent on property and asset sale.
Under the new system, a land buyer will send a scanned copy of the transaction agreement form, title deed and sketch map of the property location to KRA, which will transmit it to the respective land registry for valuation.
The land registry will send its valuation report to both the buyer and the KRA with indications of the stamp duty and capital gains tax to be collected. The buyer has the option of instructing his bank to pay the sum due to the taxman through the same system.
Currently the buyer has to make physical submissions to the concerned land registry.
The taxman is said to lose out on revenue where land assessor connive with buyers and lawyers to understate the valuation — with no comparative data — resulting in lower sums being paid to the KRA while the assessor and the lawyer pocket the rest.
Land experts welcomed the move but noted the need for a more detailed system that not only seals revenue leaks but also enhances other aspects of land transactions such as price comparability and owner verification.
“It will make collection more watertight; they are trying to control under-declaration of the human assessor,” said Mwenda Makathimo, executive director of Land Development and Governance Institute.
Mr Makathimo said automation does not have to result in a pile-up of valuation requests as the Land ministry can outsource private firms.
KRA is riding on the introduction of the capital gains tax and sealing leakage points to hit its target of Sh1.1 trillion in the current financial year.
There have been calls for automation of the Land ministry, especially from the banking sector. Unpredictability and long manual process in the ministry have been cited as causes of high interest rates.
Research by Kenya Bankers Association last year showed use of a building in Nairobi as collateral for a loan of Sh10 million would cost about Sh600,000 or six per cent of the loan amount and 60 working days to get approval.
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