KRA Tax amnesty Session

We hosted Kenya Revenue Authority on Thursday October 1, 2015 for a consumer awareness session with bloggers. They recently introduced their Tax Amnesty for rental income and this session helped shed light on this initiative.

The tax amnesty is an official pardon granted to all individual landlords by the government for past income tax evasion or omissions on rental income. Landlords in Kenya have had a challenge in declaring their rental income and remitting taxes due to huge back taxes for the past years leading to low tax compliance.

The amnesty, which will cover a period of 12 months starting 1st July 2015 to 30th June 2016, is meant to encourage tax compliance among landlords.

Individuals earning rental income, whether living abroad or in the country are eligible for the tax amnesty. In the case of a deceased property owner, the estate administrator or legal representative is allowed to account for tax on rental income and apply for the amnesty.

KRA has in place systems of tracking tax defaulters. Landlords are therefore advised to take advantage of this amnesty to clear their records with the tax man. For the year of income 2013 and prior, landlords will benefit from 100% tax amnesty on principal taxes. An amnesty on interest and penalties shall also be granted.

Further to that, for year 2014 and 2015, landlords shall only pay principal taxes and qualify for 100% tax amnesty on interest and penalties. Landlords shall then enjoy reduced tax burden in future with introduction of a simplified flat rate regime of 12% on gross rent. Once the tax compliance is met, a landlord shall not be subjected to further tax compliance checks, audit or investigation for the years 2013 and prior, 2014 and 2015 if they fully disclose any undeclared rental income.

There are landlords who do not keep financial records of their property. These are also covered in the one off Tax Amnesty opportunity. Where expenditure records cannot be supported or are not available, landlords will enjoy a deduction of 40% of the gross rental income as expenditure.

However, in cases where a landlord fails to fully disclose tax due and KRA has evidence on the same, further tax assessment will be made. Taxpayers are encouraged to voluntarily make full disclosure of any undeclared rental income. If KRA finds a non-compliant landlord, payment of tax due (including penalties and interest) will be enforced as per the current tax regime.

Landlords can apply for the tax amnesty through the iTax system.