If you are a property owner in Kenya, these are the taxes you should know about;
- Rental Income Tax
Residential Properties & Mixed-Use Properties Rent Taxes
This tax is payable by people with rental income of Kshs. 144,000 and Kshs. 10,000,000 per annum. The tax must be filled every month on or before the 20th of every month without expenses, losses or capital deduction.
Persons with rental income below Kshs. 144,000 or above Kshs. 10,000,000 per year is required to file annual tax returns and declare the rental income with income from other sources.
To calculate the residential tax income of income between Kshs. 144,000 and Kshs. 10,000,000, use the below calculator.
You can also calculate via the iTax platform by completing the monthly return on the platform. If for any reason you do not receive rent as the landlord, you shall file NIL return.
You can pay via Mpesa by using KRA PIN number 572572 and the account Number been the Payment Registration Number quoted at the top right corner of the generated payslip.
Failure to file and pay on or before the 20th of the following month attracts a penalty of Kshs. 20,000 or 5% of the due tax (whichever is higher) and subsequent interest of 1% per month on the unpaid tax until payment is made in full.
Commercial Property Rent Taxes
Value Added Tax (VAT) is chargeable on commercial rental income and is charged to the tenant at a rate of 16%. The VAT on the sale of commercial property was however declared illegal for the sale of commercial property.
Other commercial rental income is required to file annual returns and declare rental income.
2. Stamp Duty
Stamp duty is tax paid during the sale or purchase of a property. The stamp duty is based on the sale price of the property.
In urban areas, stamp duty is 4% and 2% of rural land
To determine the stamp duty charges, use the calculator below.
Stamp duty of Urban Land
One can appy for stamp duty exemption when;
- Transfer to held by family to a limited liability company wholly held by members of the same family.
- Transfering between associated companies.
- Transfer between spouses.
- Transfer in favor of any body established for charitable purposes.t.
3. Land Rent
Land rent is charged by the land ministry of land for leasehold titles. The land rent is usually stated on the certificate of title and is usually revisable. Most land rents are revised during the renewal and extension of leases.
To estimate land rent of vacant land, use the calculator below;
4. Land Rates
Land rents are paid to the county government on an annual base for both leasehold and freehold properties. The land rates are governed by Rating act. The fees are based on the unimproved site value of the property which are based on the Valuation Roll, the valuation roll is revised every now and then for updating.
5. Capital Gain Tax
Capital gain tax is levied on the transfer of property situated in Kenya, acquired on or before 2015. It is paid by the transferor of the property. The Finance Act 2022 increased the applicable capital gains tax to 15% from 5% effective 1st January 2023.
Use the below calculator to calculate Capital Gain Tax.
Some allowable expenses for the purposes of CGT include;
- Cost of Acquisition/Construction
- Loan/Mortgage interest
- Cost of advertising to find a buyer
- Costs incurred in valuation of the property
- Legal fees
- Costs of enhancements.
How To Determine the Transfer Value/Selling Prices for the purpose of CGT
- Amount received for transferring the property; Sums received in return for the abandonment, forfeiture or surrender of the property.
- Amount received for the use of exploitation of the property eg rent
- Compensation received for damage , injury to the property or for the loss of the property
- Insurance policy reimbursement in respect of injury, or loss or damage to the property.
Exemptions on Capital Gains Tax
- Income that is taxed elsewhere as in the case of property dealers
- Issuance by a company of its own shares and debentures
- Transfer of property for the purpose only of securing a debt or a loan
- Transfer by a creditor for the purpose only of returning property used as security for a debt or a loan
- Transfer by a personal representative of any property to a person as beneficiary in the course of the administration of the estate of a deceased person.
- Transfer of assets between spouses;
- Transfer of assets between former spouses as part of a divorce settlement or a bona fide separation agreement;
- Transfer of assets to immediate family;
- To a company where spouses or a spouse and immediate family hold 100% shareholding;
- A private residence if the individual owner has occupied the residence continuously for the three-year period immediately prior to the transfer concerned
- Transfer of property as a result of internal restructuring within a group which has existed for at least 24 months, and which does not involve a transfer of property to a third party.
How do I pay for Capital Gains Tax?
The due date for CGT payment shall be the earlier of receipt of full purchase price by the vendor or the registration of the transfer instrument in favor of the transferee.
-Payment should be initiated online via iTax https://itax.kra.go.ke
-The modes of payment include cash, cheque or RTGS.
-After initiating payment, you will receive a payment slip.
-Present the payment slip at any KRA appointed bank with the due tax to complete payment.