Media Brief Launch of Tax Amnesty on Rental Income by Commissioner Domestic Taxes Dept 22-09-2015 23/04/2017 www.KRA.go.ke.

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Presentation transcript:

Media Brief Launch of Tax Amnesty on Rental Income by Commissioner Domestic Taxes Dept 22-09-2015 23/04/2017 www.KRA.go.ke

Media Brief Launch of Tax Amnesty on Rental Income by Commissioner Domestic Taxes Dept 22-09-2015 23/04/2017 www.KRA.go.ke

Background on real estate taxation The real estate sector (building and construction) in Kenya has witnessed tremendous growth in recent years. Despite this significant growth, tax revenue from this sector has not been commensurate with that growth. This has been due to low compliance among landlords because of various challenges. 3 23/04/2017 www.KRA.go.ke

Why tax Amnesty on landlords? KRA commenced an aggressive tax compliance campaign targeting real estate sector in July 2012. Realized additional revenue of Kshs. 8.5 billion Challenges affecting compliance huge back taxes, poor record keeping (especially on expenses), informal practices and complex tax system. Government therefore introduced amnesty (Finance Act,2015) for landlords with objective of reducing tax burden and cost of compliance. 4 23/04/2017 www.KRA.go.ke

The following will be waived 100%:- What is the Amnesty? The following will be waived 100%:- Any principal tax, interest and penalties on rental income due for 2013 and prior. Any penalty and interest on tax on rental income for 2014 and 2015 Who is eligible for amnesty? Amnesty will benefit landlords (individual or company) who shall; Voluntarily disclose all undeclared rental income for 2014 and 2015 between 1st July, 2015 and 30th June, 2016. Submit tax return online via iTax and pay all principal taxes due. 5 23/04/2017 www.KRA.go.ke

How to apply for the tax amnesty Amnesty applicants shall download amnesty application form from KRA website. Complete and submit form to the nearest KRA station for processing. Note: Applicants shall not be required to apply for waiver of interest and penalties after submitting amnesty application, filed return and paid. 6 23/04/2017 www.KRA.go.ke

How To Compute The Taxes Due Under The Amnesty Calculate gross rental income and deduct allowable expenses to obtain net rental income. Where expenses records are not available, the amnesty law allows 40% of gross rent as expenditure. Apply relevant tax rates to the net rental income to compute tax due as follows:- For individuals, the graduated tax rates will be applied For companies, the net rental income is taxed at corporate rate of 30%. 7 23/04/2017 www.KRA.go.ke

Rate: 10% of gross rents received Other Tax Reforms Aimed At Improving Efficiency In Rental Income Taxation Finance Act 2015 has introduced key tax reforms in the rental sub sector to address concerns raised by taxpayers and challenges being experienced by KRA: Simplified flat rate regime on rental income (i.e. residential rental income tax), effective 1st January 2016. Rate: 10% of gross rents received 2. Withholding Tax Regime on Rental Income, effective 1st January 2016 Rate: 12% of gross rent but only by appointed agents 8 23/04/2017 www.KRA.go.ke

Targets for 2015/16 Successful implementation of the tax amnesty, simplified and withholding taxes on rental income regimes is expected to yield the following: Number of landlords expected to come on board – 20,000 p.a. Additional revenue expected – Kshs. 3 billion

END Comments/Questions… 10 23/04/2017 www.KRA.go.ke