The 2018 Finance Act has brought out new regulations for the calculation and payment of rental tax.
Firstly the previous law, which had stopped private tenants from withholding tax-on-rent has been repealed. The new law requires that whether you are a private tenant or an institution you should withhold the tax-on-rent and pay to NRA.
The new law has also changed the way in which rental income is charged. The threshold is changed from Le3.6million to Le6million.
Then, as explained in Section 11, the first Le6million is not charged and that goes to the landlord. On the remaining amount a 10% is deducted for wear and tear and goes to the Landlord again. On the remaining amount a further 10% is deducted and that is what is now paid to the NRA as rental tax.
Section 11 states “…the rate of tax on taxable rental income shall be 10% with the taxable rental income being arrived at by granting to the landlord- (i) non-taxable threshold of Le 6,000,000 in the aggregate; and (ii) a tax deductible allowance of 10% of the gross rental income that is in excess of the non-taxable threshold.”
The taxable rental income threshold is $1,000 USD, and landlords are now required to have a Tax Identification Number (TIN) which will enable them file returns on the income they collect.
Also before now, filing of rental income tax should be done within 90 days but that has been changed to 30days to make it consistent with other tax timelines.
Tenants withholding the 10% should now pay to the NRA account at the bank and the payment slip collected and handed over to the Landlord who will not claim it as an advance tax.
However for those property owners whose rental income falls below the $1,000 threshold, they are obligated to pay other forms of tax to the local council that administers property tax.
By Zainab Iyamide Joaque
Monday May 21, 2018.
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