Rental Tax Compliance: KRA Enlists Property Agents to Tackle Evasion

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Rental Tax Compliance: KRA Enlists Property Agents to Tackle Evasion

Due to significant shortfalls in rental tax collections, the Kenya Revenue Authority (KRA) is enlisting additional property agents to assist in addressing tax evasion among landlords.

Despite the "simplified" tax payment process, compliance among property owners remains low. The Treasury's analysis for 2022 reveals a shortfall of Sh27 billion in residential rental income tax collections.

To enhance compliance, property owners earning between Sh24,000 and Sh1.25 million monthly are now required to pay 7.5 percent tax on gross earnings. However, this simplification has not significantly increased revenue.

The government intends to tackle these challenges by expanding the registration of property agents, mapping properties, and utilizing technology. Additionally, the taxation of residential rental income will be reviewed to ensure fairness and equity.

Landlords have expressed concerns over the unfairness of paying tax on gross rental income, as significant portions go towards loan repayments and expenses. They argue that taxation should be based on net income instead.

To address these concerns, the government has identified landlords, high-net-worth individuals, small traders, and online businesses as sectors with high potential for revenue growth.