KRA Directs Landlords To Increase Rental Remittance, Pay Affordable Housing Levy

• The Kenya Revenue Authority (KRA) noted that some landlords have been filing constant rental tax for years despite rent appreciation
• In another notice, KRA ordered landlords to pay 1.5% of their gross rental income as the affordable housing levy
• Tax expert Kipkemboi Rotuk told TUKO.co.ke questions remain on how to ascertain gross rental income and apportion it to a specific natural person

TUKO.co.ke journalist Japhet Ruto brings over eight years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

The Kenya Revenue Authority (KRA) has directed landlords to ensure their rental declarations align with the market changes.

Why KRA wants landlords to increase rent

KRA raised concerns among some landlords whose rental income remained unchanged for years as it seeks to raise more revenue.

In a notice to landlords, the taxman noted that a section has been filing constant rental tax for years despite the rent appreciation.

"The commissioner has noted your rental income has been a constant figure or with a slight decline for the periods filed," KRA stated in a notice.

The government's principal revenue collector discouraged landlords from filing nil returns.

"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," KRA added, as reported by Daily Nation.

Landlords to pay affordable housing levy

In another notice, KRA ordered landlords to pay 1.5% of their gross rental income as the affordable housing levy.

The taxman asked property owners to take advantage of the tax amnesty programme until June.

"For clarity, affordable housing levy will be charged at 1.5% of gross rental income," it stated.

Why KRA's directive is unclear

Kipkemboi Rotuk, an advocate of the High Court of Kenya, explained that the Affordable Housing Act provides for levying taxes under section 4(2) on primarily employees and natural persons.

However, in the frenzy of complying with the court orders, the government erroneously failed to define the term “person”, thus lumping every other income of a person.

"It, therefore, comes as a surprise, possibly even to the legislators and policymakers, that the collector Kenya Revenue Authority has issued a notice to landlords to remit the affordable housing levy by the ninth of the following month, beginning May 2024. It could be a mistaken assumption by KRA to be the same obligation as the withholding tax they collect every month to be a tax on gross income, which applies to all landlords in the country irrespective of their registration status as natural or artificial persons," Rotuk told TUKO.co.ke.

The tax expert said it would make sense if the rental income were attributable to a natural person but not taxing the entire housing unit as an individual, considering that some people even own only two or three units in a whole rental apartment block.

Proofreading by Nyambura Guthua, journalist and copy editor at TUKO.co.ke