KRA has singled out individuals who have numerous electricity meters listed under their names, for whom it has approximated taxes due during the period when the meters have been active.
A letter seen by CK has given one landlord just 30 days to settle a Sh4.8 million tax demand, failing which tax recovery measures will be instituted.
“Records held in this office indicate that you own rental property and you have failed to declare the rental income from your property as required of you under the law.
“Please note that the amounts assessed are due and payable immediately. If you fail to comply with this notice within a period of 30 days from the date of this notice, tax recovery measures may be instituted without any further reference to you,” reads the taxman’s demand letter.
KRA is using meter location to identify the site of a property while the amount of electricity consumed is used to estimate the size of the house.
These details are used to estimate the rental income and the tax payable.
In some instances, the taxman has been sending spies to rental houses to gather information from residents and custodians who unknowingly divulge ownership details, rental rates, and number of houses – particulars that are then used to estimate rental income and payable tax.
READ: Panic grows as KRA intensifies hunt for defaulting landlords
KRA had in January said it would use utility bill data from third parties to catch dodgy landlords.
“Access to third-party data from banks and utility providers was instrumental in identification of the landlords,” KRA said in a statement, adding that it was targeting to recruit 22,000 landlords into the tax base by December.
As at June 2018, the taxman had recruited 58,934 landlords, slightly below its target of 60,000.
KRA also plans to conduct a nationwide mapping of rental property to ascertain locations, sizes and ownership of properties as a means to enforce remittance of rental income tax.
While these efforts are smart ways to improve revenue collection, tax experts warn that the initiative could create more resistance from landlords who will quickly find other means to dodge the taxman.
These unorthodox measures could include informal access to utilities such as water and electricity to hide personal data from the KRA, says Samuel Mwaura, a tax partner with Grant Thorton.
The rental income tax, which was introduced by the Finance Act 2015, is charged at a flat rate of 10 per cent of the monthly rent received from tenants, and it targets individual property owners receiving less than Sh10 million a year.