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The budget statement for fiscal year 2015/2016 read on 11th June 2015 by the Cabinet Secretary for The National Treasury highlighted a raft of tax measures aimed at collecting tax revenue from the landlords. The highlights were confirmed on release of the 2015 Finance Bill in which proposals to amend the Income Tax Act have been made to realize the revenue collection target from the landlords

The key proposals in the Bill include:

1. Introduction of residential rental income tax: Under this proposal, landlord whose annual rental turnover is less or equal to Kes 10 million will be required to pay residential rental income tax at a reduced flat rate of 12% on the gross rental income. The rate of 12% was only mentioned in the Budget Statement but is not appearing in the Bill.
2. Withholding tax on rent: Under this proposal, resident persons making rent payment for occupation of property will be required to deduct and remit withholding tax on the rent payment. Further, the Commissioner has powers to appoint agents who will be required to withhold and remit tax on rent paid by the Landlords. In this regard, we presume that all registered Real Estate Agents/ estate managers will be appointed by the Commissioner – a move likely to cause disquiet between agents and their principals (landlords).
3. Tax Amnesty for individuals: Under this proposal, individual landlords will be forgiven the tax liability (principal tax, penalties and interest) relating to 2013 and prior years of income. Further, the penalty and interest arising from tax liability for 2014 and 2015 years of income would be forgiven. This forgiveness is on condition that the landlord files their self-assessment return for 2014 and 2015 years of income by 30 June 2016. We presume you will take it upon yourself to inform the individual landlords on this excellent move by the government and which is dictated by strict deadlines. EY is at the forefront of assisting various individuals apply for this tax amnesty and we can assist in circumstances where such a need arises.

Summary

• This means residential property owners can now pay their tax compliance payments well in advance taking advantage of the lower tax rate.
• Prepare and take advantage of the tax Amnesty.

Blog compiled Lawrence Mosa with assistance from Ernest young Report