The Kenya Revenue Authority (KRA) has instructed landlords to ensure their rental rates adapt to market shifts, indicating an imminent rise in housing costs nationwide.
Expressing concern, KRA addressed certain landlords whose rental earnings remained stagnant over the years, aiming to bolster revenue generation.
In a communication to landlords, the tax agency observed a consistent declaration of rental income over extended periods.
In a separate directive, KRA mandated landlords to remit 1.5% of their total rental income towards the affordable housing levy. The tax authority advised property proprietors to utilize the tax amnesty initiative until June.
“For clarification, the affordable housing levy will be levied at a rate of 1.5% on the total rental income,” the directive specified.
Kipkemboi Rotuk, a legal practitioner at the High Court of Kenya, elaborated on the Affordable Housing Act’s provisions for imposing levies under section 4(2) primarily targeting employees and individuals.
However, amidst the rush to comply with court rulings, the government inadvertently omitted defining the term “individual,” resulting in encompassing all other sources of individual income.
“It’s somewhat surprising, perhaps even to lawmakers and policymakers, that the Kenya Revenue Authority has instructed landlords to remit the affordable housing levy by the ninth of the following month, starting from May 2024. There might be a mistaken assumption by KRA, equating this obligation to the withholding tax they collect monthly, which applies universally to landlords regardless of their classification as natural or legal entities,” Rotuk stated.
The taxation expert suggested that while it would be reasonable to tax rental income attributed to individuals, taxing entire housing units as singular entities might not be appropriate, especially considering some individuals may own just a few units within an entire rental complex.
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