KRA collects Sh1bn rental income tax, targets more

By VICTOR JUMA

The Kenya Revenue Authority (KRA) collected Sh1 billion in rental income tax last year, and is eyeing up to Sh4 billion more from landlords who have been issued with tax assessment demands.

KRA embarked on an aggressive collection of rental income tax last year, in line with government strategy of expanding the tax net by enforcing compliance on landlords.

Speaking during the announcement of the tax collections for the year 2012/13, commissioner-general John Njiraini said KRA was still experiencing difficulties as it was hard to track non-compliant landlords.

“We can only do physical verification of tax due from landlords at the moment. It will take longer to map out all properties in the country,” said Mr Njiraini on Wednesday.

The government embarked on an effort to digitise records at the Lands ministry last year, following a directive by former Finance minister Njeru Githae for KRA to intensify collection of rental income tax.

Though the law has always required landlords to pay tax on their rental income, it has been flouted due to lax enforcement by KRA and poor record-keeping by property owners.

Real estate dealers are also set to feel the heat from the capital gains tax on property transactions.

Mr Njiraini said the tax, which was suspended in 1985, will be re-introduced after consultation with experts and other stakeholders.

The KRA boss hinted that the capital gains levy will, however, mainly target property transactions, calming fears that it would hit the capital market.

“The property market is a key target. That is where a lot of investment is going and the wealthy are making profit that is not taxed,” said Mr Njiraini.


An announcement by the Treasury secretary Henry Rotich in June of the plans to re-introduce capital gains tax saw a sudden turnaround in fortunes of investors at the bourse, as their wealth slumped by Sh100 billion in two weeks.

Mr Njiraini said taxation should focus on sectors where spending and investments are going, such as the real estate market.

“It is not fair to leave it (property market) out of capital gains tax because the investors there are wealthy and enjoying high returns.”