TAXES & REAL PROPERTY IN KENYA | an Overview | Part 1

Introduction

This First deposit of a 6 Part series is to provide a general overview on the various taxes, fees and levies affecting real estate developers/clients in Kenya. The intendment is purely for eye-opening and to add to the knowledge base on the subject. This is a 6 Part series that spans the entire Life Cycle of a Real Estate Development Project.

Lets get the journey started.

The construction industry is a major player in the economy of this nation and contributes immensely on the revenue source for the Government. At the core of this industry, is the developer who faces various taxes and levies in his endeavor to produce a House/ Construct.

For purposes of this presentation, developer refers to the persons who undertake the entire process from Land acquisition, Construction and disposing of the same for use either in person or by a Client.

In the course of which, he engages various professionals and interacts with both Central Government, Local Government, State Corporations etc paying taxes and levies and receiving benefits or government services in return.

Definitions:

Tax is a compulsory financial contribution imposed legally by a government to raise revenue

Property tax is a tax levied on real property. Real Property includes real estate, buildings, and anything permanently attached, such as elevators and air conditioners.

Generally, tax regimes operate on the basis of two principles:

A. Ability-to-Pay principle- This presents a case against person withholding taxes due. It is held that people should be taxed according to their ability to pay, regardless of the benefits they receive. Firstly, societies are not always able to measure benefits derived from government spending. Secondly, it is assumed that persons with higher incomes suffer less discomfort paying taxes.

B. Benefit Principle– is based on two ideas. First, those who benefit from government services should be the ones to pay for them. Second, people should pay taxes in proportion to the amount of services or benefits they receive.

Tax systems operate under the principles of Equity, Simplicity and efficiency.

Taxes affecting Real Estate developers in Kenya


The Other Parts of the Series are

Part 2 | Land Transaction Costs

Part 3 | Consultancy Costs

Part 4 | Construction Costs/Taxes

Part 5 | Ownership Costs

Part 6 | Economic Impact of Taxes & Proposed Solutions

At the end of this 6 Part Series, I am most certain any of my readers will appreciate the interplay of the various taxes and costs on Infrastructure Projects.

The Series is only a skeleton guide and would be updated fromtime to time as I continue in my research.

@UjenziBora

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~ by ujenzibora on July 23, 2010.

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