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Real Estate Sector - Speech by Commissioner DTD MST PDF Print

SPEECH BY THE COMMISSIONER OF DOMESTIC TAXES DEPARTMENT-

SMALL & MEDIUM TAXPAYERS,

ALICE OWUOR (OGW)

 

 DURING A STAKEHOLDER SENSITISATION ON TAXATION OF THE REAL ESTATE SECTOR

 

HELD AT THE 5TH FLOOR CONVENTION CENTRE, TIMES TOWER ON

FRIDAY THE 13TH JULY 2012

 

 

 

 

 

Commissioners

Distinguished Guests

Ladies and Gentlemen

All Protocols observed

It is a great pleasure to get this opportunity to address this important stake holder gathering on taxation of the Real Estate Sector with the aim of ensuring enhanced compliance through informed awareness and enhanced Customer Service.

Ladies and Gentlemen

The purpose of this sensitization is to bring clarity to the current focus by KRA on the taxation of the Real Estate Sector.

I would like to reiterate that Rental Income like any other income has been subjected to taxation since the enactment of the Income Tax Act Chapter 470 of the Laws of Kenya in 1973.

What KRA then seeks to address is the compliance issues related to Rental Income and the Real Estate Sector and the perception that this is a NEW TAX measure being enforced.

Ladies and Gentlemen

I wish to appeal to those of you who have not been making declarations in relation to Rental as well as other Real Estate earnings to do so at your earliest opportunity to avoid any penalties that may arise as a result of non compliance.  In order to assist in this area, we have published on the KRA website and in the local dailies details of how to comply with the declaration requirements. Please take advantage of this information.

Ladies and Gentlemen

In a quest to level the playing field, KRA will ensure that all taxpayers’ Rights and Obligations are observed and indeed we have a vigorous Taxpayer education programme countrywide to sensitize our clients on how to comply.  Measures taken to facilitate this include:

i)         The upload of a webpage on the KRA website to provide relevant information.

ii)       An ‘Information pack’ containing what you need to know in order to comply, and answers to Frequently Asked Questions (FAQs). The information is available on the KRA Website and printed copies are also available at your nearest KRA office.

iii)     An email address This e-mail address is being protected from spambots. You need JavaScript enabled to view it  has been assigned to enhance communication between KRA and taxpayers on areas of concern:

iv)    Introductory sensitization seminars are being conducted countrywide at all regional headquarters

v)      Help Desks have been set up at Times Tower and all Domestic Taxes Offices country wide.  In addition specific contact persons have been identified countrywide for more focused attention.

vi)    Sensitisation clinics in all major towns

vii)  Networking with professional bodies i.e ICPAK to assist those interested in accessing professional assistance

I believe these measures will be of immense benefit to those who genuinely want to comply.  I would urge you all to take advantage of the information provided to avoid being on the wrong side of the law.

Ladies and Gentlemen

For your information and interest, our current focus on this sector is informed by a pilot study undertaken in some areas of Nairobi in the very recent past. The study revealed that there was significant non-compliance amongst property owners, developers and other stakeholders in the industry.  Our focus at present is on giving support to enhance voluntary compliance.

Ladies and Gentlemen

According to the Kenya Economic Survey, the sector grew by 16% and 17.5% in the years 2009 and 2010 respectively hence making it a high growth sector. Gains resulting from real property development and sales have attracted significant investment resources to this sector in the recent past.  However, there has been no corresponding growth in revenue from this sector. This is partly because Real property developers have in the past sought to shield the profits they make by erroneously treating it as a Capital Gain whose taxation was suspended in 1985.  Further, we have noted a tendency among some developers to use multiple corporate vehicles with the intention of defeating requirements for the taxation of the gains they make.  I would like to caution those in real estate development to note that gains made by those involved in the development and sale of real estate are business profits subject to taxation. 

Ladies and Gentlemen

I wish to note and appreciate the collaborative engagement we have with key players in the industry in giving us support to ensure compliance by this sector. Among them include; the Ministry of Lands, Local Authorities, Water and sanitation companies, Kenya Power and financial institutions. We are also looking forward to working closely with umbrella bodies of professionals in the industry such as Architectural Association of Kenya, Institute of Engineers of Kenya and Institute of Surveyors among others to assist in ensuring compliance by their members. We also look forward to working closely with ICPAK for the support of taxpayers who need professional services.   It is my appeal to you all to join and support this network for compliance to be enhanced.

It is important for those in Real Estate business to know that, by virtue of the nature of the business they are in, it is impossible to hide since property is an immovable asset and it will therefore just be a matter of time before we are at your door step. The best option therefore, is to come out voluntarily to make your self-declarations and payments at the earliest opportunity to avoid stiffer penalties and interest.

Ladies and Gentlemen

We will continue to tirelessly engage players in this industry countrywide to ensure that our noble objectives are realized at minimal cost and least inconvenience to those willing to cooperate. 

The public is however advised to always ascertain the identity of officers visiting their premises for Real Estate, rental income matters and KRA business in general. When in doubt, you are advised to contact the Manager of the nearest KRA Office whose contacts are listed on the ‘real estate and rental income’ web page on the KRA website (www.kra.go.ke) for assistance or to get in touch with our call centre – telephone number 020-4 999 999.

   Thank you.

 


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