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Impact of 30% rental income tax on housing development in Kenya
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Bachuma Gate
#31 Posted : Thursday, June 14, 2012 6:18:18 PM
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Joined: 3/26/2012
Posts: 280
ALMA and Ali

Pls see my post again. It is not about tax evasion.

Give me your thoughts on point :-

1. ROI on rental properties viz other investments like Stocks, T/Bills and bonds. The reasons is investing in real estate is not a full time activity for most guys. So if it does not pay well why would I want to go developing houses than invest in Stocks and T/Bs.

2. With the high interest rates in Kenya, I am seeing guys almost getting zero from this biz.

Pls your thought out opinion as an investor.
DOH
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kyt
#32 Posted : Thursday, June 14, 2012 6:54:15 PM
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Joined: 11/7/2007
Posts: 2,182
i think the KRA guys really have to think this over, because as i see it its going to be hard to determine how many tenants are occupying the house at one go. the cost of ensuring this is adhered to maybe higher than its benefit.
LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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kyt
#33 Posted : Thursday, June 14, 2012 6:58:18 PM
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Joined: 11/7/2007
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then again guys who have single rooms will also not be affected since maybe a house may have 6 rooms@2500. ukilipa agent, maybe security na maybe one is un occupied. ur net is less than 10k which is not taxable. itakuwa hard.
LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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kyt
#34 Posted : Thursday, June 14, 2012 7:02:08 PM
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i also think that if all goes bad. people will just "sell" all their houses to companies (plus the liabilities) what will be left of the net given that loans are more expensive than the income?~answers please!!
LOVE WHAT YOU DO, DO WHAT YOU LOVE.
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Ndaragwa
#35 Posted : Thursday, June 14, 2012 7:29:26 PM
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Joined: 3/12/2011
Posts: 108
kazee wrote:
The income tax act which you can download online is very very clear on this even to a layman by the way. Am no accountant but from what i read, rent income is not subject to VAT (16%), revenue tax(5% of gross revenue- it says that). Tax on rent is expected to fall under the same bands of employment tax and therefore anything above 30k will be taxed at about 30% of gross income.
This may definately have an impact on rents since as every supplier does e.g. eabl and BAT when taxes go up, new prices are posted in print media the next day. The rent may not go up by 30% since that would be horrendous but they will definately rise.


Kazee you seem to have read the income tax act. I am just curious realizing Kenyans in the diaspora own a lot of rental properties in Kenya. Do they pay Kenyan taxes on their rental income? I imagine they report the rental income as foreign income in their country of residence and pay the taxes on the income.Sounds like it could be a case of double taxation.
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  | | Edit by user: Thursday, June 14, 2012 7:33 PM | Reason: Not specified
Ali Baba
#36 Posted : Thursday, June 14, 2012 8:48:00 PM
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Ndaragwa:when you say "kenyans in diaspora" pay taxes as in foreign income in their taxes.Yes,In most countries like the US are supposed to do that.Double taxation??No.US exempts taxes paid...if the tax was paid to another jurisdiction.However,a good number of kenyans in the diaspora are also in default.They don't pay any tax on rental income in any jurisdiction....
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Ali Baba
#37 Posted : Thursday, June 14, 2012 8:55:49 PM
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Tax on rental income should be on net profit.If the salary of your guard is sh100k,that's ok.Just provide KRA with his PIN number so as to confirm his PAYE payments.Its simple.Isn't it???
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Ndaragwa
#38 Posted : Thursday, June 14, 2012 9:24:03 PM
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Ali Baba wrote:
Ndaragwa:when you say "kenyans in diaspora" pay taxes as in foreign income in their taxes.Yes,In most countries like the US are supposed to do that.Double taxation??No.US exempts taxes paid...if the tax was paid to another jurisdiction.However,a good number of kenyans in the diaspora are also in default.They don't pay any tax on rental income in any jurisdiction....


Ali Baba I agree Kenyans in the diaspora should pay taxes on rental income to some jurisdiction. USA has no income tax treaty with Kenya that would exempt diaspora residents in the US from any taxes they pay in Kenya - so, I think it would be double taxation for those who pay taxes in Kenya on their rental income and pay another tax on the same income in US. Any insights from a tax expert?? How are the tax treaties between Kenya and Great Britain; and Australia where most of the diaspora are residents??
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  | | Edit by user: Thursday, June 14, 2012 9:31 PM | Reason: Not specified
Ali Baba
#39 Posted : Thursday, June 14, 2012 9:49:16 PM
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NDARAGWA:Foreign earned income clause exempts Kenyans in US who pay taxes in another jurisdiction the amount subsequently paid.Don't get complicated with tax treaties.Its already there.However,Kenyans in diaspora acts are illegal of failing to declare rental income in any jurisdiction...
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Ali Baba
#40 Posted : Thursday, June 14, 2012 9:52:19 PM
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Ndaragwa,visit IRS website and check "foreign income"....its all there;no need for treaties and commerce secretaries to meet with Githae to iron out agreements....
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