Landlords must clear tax arrears, says KRA
The almost completed housing units by NHC in Langata . Jack Owuor
LANDLORDS with outstanding rental income tax will have to pay the overdue amounts or face legal action even as they continue to make annual remittances to Kenya Revenue Authority as spelt out in the budget, the chief tax collector said yesterday. “I strongly urge those who have not been making rental income declarations to do so voluntarily at the earliest opportunity and to pay the taxes due thereof,” the Commissioner General , John Njiraini saiid.
However, he did not specify if KRA will demand a lumpsum or payment in installments. The taxman targets to raise an estimated Sh90 billion in the next financial year from rental income tax. “Rental income like any other businesses income has been subject to taxation for as long as I can remember, those who have not been paying therefore have been evading tax , which has both criminal and civil liability,” Njiraini said during the ICPAK post budget analysis meeting in Nairobi.
Njiraini warned of 'harsh consequences' for those who will wait until KRA comes after them. “Details to facilitate those who wish to make voluntarily disclosures will be publisized soon” He said said the Consumer Federation of Kenya's threats to go to court is a futile exercise unless the lobby group is keen on invoking the income tax act suspension.
Meanwhile, KRA is pushing for the re-introduction of Capital Gains Tax which was suspended in 1985 and partly reintroduced in 2006. The taxman wants the government to seal loopholes that property market players have been exploiting to evade taxes leading to loss of billions in revenues in the booming real estate sector. “Real property developers have in the past sought to shield the heavy profits they make by using as an excuse the suspension of Capital Gains Tax,” said Njiraini.
The CGT which was suspended in 1985 is the tax on profit realised on the sale of a non-inventory asset that was purchased at a lower price. Most common capital gains are realized from the sale of stocks, bonds, precious metals and property. In 2010,KRA published some rules to provide guidance on the real estate taxation. These stated that gains made by those involved in development and sale of real property as a business are taxable. But it now seems these did not have much impact and now KRA want the CGT law reversed.