What KRA’s Move Against Landlords Means to Tenants
Emphasizing the need to have rents in line with market changes, the KRA is pushing to see an increase in rent payments, which will inevitably cause a stain on the tenants.
AREBP
Rental tenants in Kenya might be on the verge of either having to move to new houses or coughing up more money to cater to their rental needs, should the Kenya Revenue Authority follow through on their notices to landlords.
The revenue authority last week issued notices to landlords whose rental income hasn’t changed for years. The notices were also sent after the authority realized unchanged taxes for several property owners, suggesting either their rents have remained stagnant or that they are tax evaders.
Emphasizing the need to have rents in line with market changes, the KRA is pushing to see an increase in rent payments, which will inevitably cause a stain on the tenants.
In part, the notices read; “The commissioner has noted your rental income has been a constant figure or with a slight decline for the periods filed. We understand rent is an appreciating commodity with economic times and we expect your declarations for the current month will reflect that and if any previous returns declarations can be amended as need be. Filing of Nil or decline in rental income is highly discouraged.”
Even as the authority is aiming at ensuring landlords who have underdeclared their rental income come out, the notice will not only affect the already frustrated landlords who have high vacancies but also tenants who may be required to adjust to the new rental prices should the landlords effect that.
With the increased inflation in the country, which has caused most citizens have their salaries fail to match inflation, the move by KRA is geared towards further hurting the tenants. This is in addition to the housing levy that was effected by the government on each worker.
The authority’s move is, however, said to be reactionary following the fact that the government did not hit its target for rental income collection and has since been recruiting more property agents after a study revealed a shortfall of Ksh27 billion in projections for 2022. In the Finance Act 2023, the government introduced a provision for the appointment of rental income tax agents who are tasked with collecting and remitting the tax to KRA.
Some landlords have expressed frustration, noting that they cannot suddenly increase rent as that is likely to cause one’s tenants to vacate.
The Kenya Revenue Authority Head Domestic Taxes Department, North Rift Region, also issued a letter noting that landlords are now required to remit 1.5 percent of their gross rental income starting May 9. The amount will be due by the ninth of every month going forward.
"This is, therefore, to remind you to remit the AHL by the due date of the 9th of every month, starting this month of May 2024. For clarity, AHL will be charged at the rate of 1.5 percent on the gross income received or accrued," the letter reads in part.
The said income, the tax authority clarified, covers the gross rental income, gross sales receipts (amount chargeable to turnover tax), and any other sales before subjecting the same to VAT.
"We would also like to urge you to take advantage of the Tax Amnesty Program introduced in the Finance Act, 2023, by paying all the principal taxes outstanding for the period up to December 2022 by June 30, 2024," it added.
The Authority is the designated collector of the Affordable Housing Levy.
Property owners are not allowed to deduct expenses, losses, or capital deductions. In the past, landlords were required to pay 10 percent on rent after deducting expenses like mortgages and renovations.
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