Landlords face new difficulty as KRA cracks the whip

KRA commissioner general.
John Njiraini, KRA commissioner general. PHOTO/FILE
Kenya landlords are this month expected to pay rental income tax to the Kenya Revenue Authority (KRA) as the government seeks to raise its revenue to meet its budgetary obligations in the coming fiscal year.

The rental income tax, which is charged at a flat rate of 10 per cent of the monthly rent received from tenants, adds pressure on landlords who are already contending with the rising costs of construction and high cost of loans.

The tax targets individual landlords earning less than Sh10 million annually.

In February, KRA began sending compliance notifications to residential and commercial landlords who have not remitted their taxes since January.

KRA acting commissioner for domestic taxes Ruth Wachira said last month that the taxman had sent compliance notices to 12,000 landlords as of February 7, and the number was expected to rise to over 100,000 by March 31.

“As for those who fail to respond by end of March, KRA intends to estimate residential rental income tax due from the property information available and take enforcement measures provided in the law,” said Ms Wachira.

KRA has several legal mechanisms to enforce compliance, including asking tenants of the affected landlords to pay rent directly to it until the debt is fully settled, drawing cash from the landlord’s account and, in some cases, auctioning the property.

KRA has been collecting information on property owners in Nairobi and plans to use the data to work out the rental income tax due.

The data, which is mainly being collected from tenants, includes the landlord’s name, postal and telephone contacts, details of property and rental receipts for the units.

The taxman has already covered sections of the city centre, Imara Daima, Ngong Road, Dagoretti, Donholm and Zimmerman estates – and expects to cover the entire city of Nairobi by mid this year.

The government last June initiated rental income tax changeable at a flat rate of 10 per cent with the aim of collecting Sh10 billion a year. The move has caused panic among landlords who are now rushing to abide by the law.