The Kenya Revenue Authority (KRA) has launched a new online system for landlords to file and pay taxes, making property owners to be among the first set to be included in a bigger centralised platform.
Known as Enterprise Integration Platform, Gava Connect, the programming application is designed to enable IT developers to create digital solutions that simplify access to tax services.
The KRA said landlords have the option to comply through the Electronic Rental Income Tax System (eRITS) which went live on Thursday by logging onto the Gava Connect system, which was launched last November.
The law requires persons earning an annual rental income of between Sh288,000 (or Sh24,000 a month) and Sh15 million (Sh1.25 million every month) to pay tax monthly at the rate of 7.5 percent of the gross revenue.
“eRITS is designed to enable seamless integration with the KRA ecosystem for purposes of tax computation, filing, and payment; and is accessible through the Gava Connect API portal for system-to-system integration, and as a service through the eCitizen platform,” KRA Commissioner-General Humphrey Wattanga said in a statement.
“The intention is to augment voluntary compliance within the sector while reducing administrative burdens associated with taxation" he added.
The taxman first introduced the Monthly Rental Income (MRI) tax in 2016 at the rate of 10 percent below reducing the rate to 7.5 percent in January 2024 to drive voluntary compliance.
Landlords, who have been categorised as hard-to-tax groups alongside small traders in informal settings, remitted Sh14.4 billion last financial year ended June 2024, a 5.8 percent rise over Sh13.6 billion in the prior year.
The growth rate slowed last fiscal year compared with the year ended June 2023 when collections from landlords increased 10.6 percent from Sh12.3 billion the year before.
“With eRITS, we are moving towards a smarter, more efficient tax system that benefits everyone. With this system, we aim to not only increase revenue collection but also create a more equitable and predictable tax environment that benefits both taxpayers and the government,” Principal Secretary for The National Treasury Chris Kiptoo wrote in the statement.
Low compliance amongst real estate owners who generate rent from their property in the past prompted the KRA to implement Block Management Strategy (BMS) which uses a geographic information system (GIS) to map out buildings in various residences, largely Nairobi and Mombasa.
The system classifies various estates into blocks of flats where the taxman identifies landlords who are tax-compliant and those not in the tax net and detect new buildings springing up.
KRA has identified real estate (landlords), high net-worth individuals (HNWI), small traders in an informal setting, and businesses operating online as sectors with high potential for growing revenue, but “hard-to-tax”.
An analysis of residential rental income tax covering the year 2022 by the Treasury showed that collections underperformed targets by Sh27 billion.
Past data showed KRA had 76,025 real estate owners in its register in June 2021, a 29 percent growth over 58,934 property owners in June 2018.
