The government has warned of arrests and prosecutions for property agents operating without permits in an ongoing effort to increase tax revenue from the real estate industry.
The Estate Agents Registration Board (EARB)cautioned landlords against engaging unregistered agents to prevent any service interruptions at their properties.
Speaking at an event in Kiambu, EARB Board Registrar Hellen Abuya said the Estate Agents Act required estate practitioners to register with the board annually in order to be issued with an annual practicing certificate.
“To uphold public interest and promote professionalism in the real estate sector, consumers are encouraged to exclusively engage with registered estate agents. Estate agent registration is available to full members of the Institution of Surveyors of Kenya who practice in valuation and estate management, building and land management, or individuals holding a degree, diploma, or license from a university or college acknowledged by the board,” Abuya said.
“An individual practicing as an estate agent without the necessary registrations may be subject to a fine of up to Sh20,000, a jail term of up to two years, or both upon conviction as per the law,” said Ms. Abuya.
She added that the board may also register a member without the specified qualifications if it deemed them to be of good character and free from convictions of fraud or dishonesty.
The announcement coincides with the Treasury’s commitment to allocate additional funds for improved agent registration, aiding in the reporting of landlords who failed to remit rental income tax to the Kenya Revenue Authority, after previously raising concerns about the low compliance rates among landlords in submitting and reconciling taxes with the KRA, despite efforts to simplify the process
Residential property owners earning between Sh24,000 and Sh1.25 million per month are subject to a simplified tax process, where they are required to pay 7.5 percent of their gross earnings.
The current rate came into effect in January after adjustments were made to the Finance Act 2023, reducing it from the previous 10 percent.
“The simplification was implemented to improve compliance. While it has led to a rise in the number of taxpayers, it has not met the expected compliance levels in remitting rental income tax,” stated the Treasury in the 2024 Budget Policy Statement.
To tackle compliance issues in rental income taxation, the government plans to improve the registration of property agents, map properties by utilizing technology to promote fairness and equity. It will also reassess how residential rental income is taxed.
The KRA’s block management strategy, supported by a geographic information system (GIS), involves assigning tax service officers to specific residences within blocks and sub-blocks to improve mapping of landlords.
According to the most recent data, as of June 2021, the KRA had 76,025 real estate owners, reflecting a 29% increase from the 58,934 property owners reported in June 2018.
The increased utilization of agents will support the block management strategy, which involves implementing mapping technology by the KRA to distinguish tax-compliant landlords from those outside the tax net and to identify new constructions.
The initiative to improve the registration of property agents to promote compliance in residential rental income comes after the hiring of 1,400 paramilitary revenue officers last year, a move aimed at boosting compliance among small traders operating in informal environments.
