Thursday, 27 August 2015

TAX ALERT - Tax amnesty for individual landlords!


Overview
  • The Government has granted a tax amnesty for individual landlords on their rental income.
  • Landlords are required to declare their rental incomes for the years of income 2014 and 2015, file returns and pay tax thereon by 30 June 2016 to qualify for the amnesty.
  • For 2013 and prior years of income, 100% of principal taxes, penalties and interest will be forgiven.
  • For the years of income 2014 and 2015, 100% of penalties and interest will be forgiven.
  • KRA will issue amnesty certificates for landlords who comply with terms of the amnesty.

Terms of amnesty

The government, through the Finance Bill 2015 has granted a tax amnesty for individual landlords on their rental income. To qualify for the amnesty, landlords will be required to declare their rental income, file returns online and pay principal taxes for the 2014 and 2015 years of income by the 30 June 2016.










Implications

The amnesty effectively means that a taxpayer in default can declare and pay the principal taxes for the years of income 2014 and 2015 and all other taxes on the rental income, penalties and interest will be forgiven. 

In case of unavailability of expense receipts, the taxpayer is  allowed to deduct 40% of the gross receipts as expenses. 

Note however that the amnesty has not been extended to companies.

In addition, the government has introduced simplified tax compliance for Resident landlords earning KShs 10 million or less per annum from residential properties with effect from 1 January 2016. They will pay a monthly flat rate of 10% of the gross rental income. This will be a final tax.

Further, the government has introduced a withholding tax of 12% on rental income wef 1 January 2016. The commissioner will appoint withholding tax agents. The withholding tax will be an advance tax.

Resident landlords who wish to remain under the current tax regime will be required to write to the commissioner for approval. 

Recommendations

The amnesty is a welcome relief for individual landlords, some of whom have failed to comply out of ignorance or the high cost of compliance. Landlords who take advantage of the amnesty will avoid the burden of principal taxes, penalties, interest and potential prosecution for tax evasion.  

We recommend that individual landlords should contact their tax agents to take advantage of the amnesty.

To contact us:

East African Tax Consulting
Mobile: +254 722 332729
Email: starlings@taxeac.com 
Contacts: Starlings Muchiri, Samuel Karanja

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