1. Media Brief Launch of Tax Amnesty on Rental Income by Commissioner Domestic Taxes Dept 22-09-2015
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2. Media Brief Launch of Tax Amnesty on Rental Income by Commissioner Domestic Taxes Dept 22-09-2015
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3. 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
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4. 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
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5. 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 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 between 1st July, 2015 and 30th June, 2016.
Submit tax return online via iTax and pay all principal taxes due. 5
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6. 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
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7. 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
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8. 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
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9. 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

10. END Comments/Questions…10
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