Rural-urban migration has been a global phenomenon, especially in recent years. Kenya has not been an exception in this development, which has seen many people migrate from rural areas to urban settings in pursuit of a better source of livelihood. Various studies have attributed this trend to the impetus, which has been injected in the growth of the real estate sector, especially residential rental premises.
True to this assertion, residential rental premises continue to spring out in the outskirts of major urban areas in the country such as the Nairobi. However, despite this vibrant growth in the sector, a key question comes up: Is the country fully benefitting in terms of revenue collected from this sector?
In a bid to tap more revenue from rental residential premises sub-sector within the real estate sector, the government, through the Finance Act 2015, amended the Income Tax Act to introduce Section 6A, which provided for a simplified tax regime for landlords who have invested in residential premises. With effect from January 2016, landlords were required to file a tax return and pay 10 per cent of the gross rent collected every month. Compared to the former regime where landlords were required to do extensive bookkeeping, the simplified regime did away with complex bookkeeping procedures.
According to the Kenya Revenue Authority’s recently launched the Seventh Corporate Plan, and more than 58,000 landlords were recruited in the last six months of the 2015-16 financial year. The taxman, further according to the plan, targets to recruit more than 66,000 landlords in the next three financial years as part of the agency’s tax base expansion initiatives. This step shall, in turn, enhance the country’s overall revenue collection.
In the spirit of trust and self-assessment regime that our tax system is pegged on, there is a dire need for landlords to come out in large numbers and ensure their contribution to the national revenue kitty counts. With this and many other initiatives, Kenya will not require the boosting of foreign debts to sustain herself.
Karatina
