1. KENYA REVENUE AUTHORITY IMPLEMENTATION OF NEW TAX MEASURES ON RENTAL INCOME (FINANCE ACT 2015 & 2016) presentation to ICPAK Best WESTERN HOTEL CREEKSIDE hOTEL NOVEMBER 2016 1

3. Tax Amnesty on Rental Income
Scope of Presentation
Tax Amnesty on Rental Income
Residential Rental Income Tax
Withholding Tax on Rental Income Tax

4. 2015 Tax Measures on Landlords
The Govt. thro’ the Finance Acts 2015 and 2016
approved implementation of 3 key tax measures on
rental income;
Tax Amnesty on rental Income
Residential Rental Income Tax
Withholding Tax on Rental Income Tax

5. 1.Tax Amnesty Tax Amnesty on rental income for Landlords
(individual/company)
Effective period; 1st July 2015 to 30th June 2016
Period ended on 30th June 2016
Processing of Amnesty Cases is ongoing

6. 2.Residential Rental Income Key Highlights
A simplified tax regime (residential rental income tax) was introduced w.e.f from 1st Jan
It applies only to residential rent income. It is payable by resident persons (Indiv or Company)
Tax rate is 10% on gross rent income.
What is the Tax point? –Tax is paid on rent received. (Receipt Basis)

7. RRI Key Highlights contd
RRI is a final tax – any income from rent that is subject to residential rental income tax shall not be liable to any other tax.
No expenses & capital allowances are allowed for deduction.
For properties owned by partnerships.
Profits are to be taxed according to their profit sharing ratio.

8. RRI Key Highlights Cont’d…
Tax Threshold
12,000pm or 144,000 Pa
But does not exceed Kshs. 10M (average of Kshs. 833,333 per month)
Notes;
Landlords earning below Kshs. 12,000 per month are exempted from RRI from 9th June
However, such taxpayers were required to file RRI returns till May 2016.

9. Key Highlights on RRI
Other legal requirement (Legal Notice No. 106) RRI Regulations)
Where the rental income exceeds Kshs. 10M during a year of income or a person has reason to believe that the rental income is likely to exceed Kshs. 10M, The person shall inform the Commissioner of that fact before end of that year of income
A person shall keep such records necessary for the determination and ascertainment of tax in accordance with the Tax procedure act 2015.

10. Key Highlights on RRI Cont’d…
Penalties for RRI offences
Failure to file return by due date – Kshs. 20,000 or 5% of principal amount due, whichever is higher
Any tax not paid by the due date will attract;
Penalty at 20% of the tax payable, and
Interest of 1% per month.

11. Key Highlights on RRI Cont’d…
Payment of Tax
Itax platform through appointed KRA banks
Mobile Money
Paybill No:
Account:PRN No

12. With holding Tax Regime on
Rental Income

13. 3. Withholding Tax on Rental Income
The Law
Finance Acts 2015 & 2016 have empowered KRA to implement a withholding tax (WHT) regime for rental income to promote compliance.
WHT agents shall be required to deduct and remit withholding tax on gross rent paid to resident landlords (Section 35(3)(j) of Income Tax Act).
The tax will apply for rent payable for both residential and commercial property.
Effective date - 1st January 2017.

14. Withholding Tax on Rental Income
2. Who qualifies to be appointed?
Commissioner has been mandated to appoint any person paying rent to a resident landlord as a rent WHT agent.

15. Withholding Tax on Rental Income
3. Who qualifies to be appointed?
Private Institutions
Supermarkets
Banks
Insurance companies
Micro-Financial Institutions (MFIs)
Advertising Firms
Telecommunication companies e.g. Safaricom
Public Institutions
Government Ministries

16. Withholding Tax on Rental Income
3. Who qualifies to be appointed cont’d…
Public Institutions cont’d….
Government agencies and departments e.g. Universities
Parastatals
County Governments
Others
Property/estate agents

17. Withholding Tax on Rental Income Cont’d......
4. Rate and Description of Withholding Tax
Appointed agents shall withhold tax on rental income at a flat rate of 10% of gross rent payable (excluding VAT where applicable).
Tax withheld shall be paid by 20th day of the month following rent payment.
WHT on rent shall be effective, 1st January 2017.
WHT on rent shall not be a final tax.
Therefore, taxpayer whose tax is withheld shall be required to file returns and claim the withholding tax credits accordingly.
Not monthly- its upon payment of rent

18. Withholding Tax on Rental Income Cont’d......
5. Computation of WHT rent tax
Worked Example:
Kshs.
Gross rent payable to landlord per month ,000
Deduct WHT on 10% (500,000*10%) ,000
Net amount payable to landlord (500,000-50,000) 450,000

19. Withholding Tax on Rental Income Cont’d......
Payment of WHT tax on rental income
Tax withheld shall be declared and paid via iTax on or before 20th day of the month after rent payment.
Payment process is as follows;
Log on to iTax.kra.go.ke
Go to ‘Payment’ menu, Select ‘Payment Registration’
Select the ‘Tax Head’ (Income Tax)
Select the ‘Tax Sub Head’ (Income Tax – Rent Withholding).

20. Withholding Tax on Rental Income Cont’d......
Payment process Cont’d….
Provide the required landlord, property and gross rent details.
Generate Payment Registration Number – PRN (i.e. E-slip), and
Make payment using the PRN at the selected bank.
NB: Detailed Step by Step Guide provided at KRA website

21. Withholding Tax on Rental Income Cont’d......
7. WHT Certificate
WHT Certificate will be generated automatically by
iTax and sent to landlord once tax due is paid.
The landlord shall claim credit for WHT deducted in their tax return for the period using the WHT certificate.

22. Withholding Tax on Rental Income Cont’d......
9. Exceptions to the withholding rental income regime
No withholding agent/tenant shall withhold tax unless they are duly appointed by the Commissioner.
Rental income paid to exempt persons shall not be subjected to withholding tax.
However, a valid exemption certificate issued by KRA must be produced.
Non-resident landlords
Tenants shall continue to withhold at 30% of the gross rent payable to the landlord

23. Withholding Tax on Rental Income Cont’d......
10. Penalties for non-payment of withheld tax
Any tax not paid by the due date will attract;
Penalty at 10% of the tax payable, and
Interest of 1% per month.
As specified under the Income Tax Act & Tax Procedures Act (2015), respectively.
Note: it is an offence to WHT on rental income without being appointed by Commissioner.

24. Withholding Tax on Rental Income Cont’d......
11. Benefits of the WHT on Rental Income
Enhanced recruitment of landlords who are currently not within the tax bracket.
Enhanced taxpayer compliance.
Increased government revenue.
Reduced cost of collecting tax on the part of KRA.

25. Taxpayers Support Measures
KRA has put in place the following support measures to facilitate taxpayers :
Established Help Desks at Times Tower and Stations country-wide.
Created a specific address to enhance communication ;
Created a specific webpage at KRA website to provide information : ‘2016 Landlords Legislation’.

26. Taxpayers Support Measures Cont’d…..
Use of KRA Call Centre, iTax Support and National Huduma Centres.
Prepared taxpayer education materials; brochures, FAQs, step by step guides.
Countrywide taxpayers sensitization, publicity and marketing programmes.

27. Thank You For Your Continued Support