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The fee varies with service from a low of 0.25% to a maximum of 10%. Employed agents earn a salary
1. SCHEDULE Scale 1 Sale:
This is paid on a graduated scale
(a) On the first Ksh. 100,000 10%
(b) On the next Ksh. 900,000 6%
(c) On the residue 3%
Thus, if you are a real estate agent and help a buyer sell their property, above is the amount set in law.
2. SCALE 1A Purchases:
This is also paid on a graduated scale
(a) On the first KSH. 100,000 5%
(b) On the next Ksh. 900,000 3%
(c) On the residue 1.5%
Thus, if you are a real estate agent and help a buyer buy a property, above is the amount set in law.
3. SCALE 1B On Sales of Plant and Machinery:
Ten per cent of the total value realized.
(a) SCALE 1C Sale and Purchases Effected by a Transfer of shares:
(b) Scales 1 and 1A shall apply undiminished by any loan or other charges upon the property or the Company’s assets.
4. SCALE 2 LETTINGS
Residential:
(a) Lease up to one year 7.5% of annual gross rent.
(b) Lease of over one year One months rent
Commercial:
(a) Sole agency 7.5% of annual gross rent
(b) General agency 10% of annual gross rent.
Fees by negotiation if management services involved but not less than half scale.
5. SCALE 3
(a) For seeking and negotiating the tenancy or lease of a property to suit a clients requirements: The fees payable as per the appropriate letting scale and by arrangement if negotiations abort.
6. SCALE 4 MANAGEMENT
Residential:
a) 10 per cent of the gross rents or less according to the circumstances but not less than 5 per cent.
b) Commercial:
c) 7.5% per cent of the gross rents or by arrangement but not less than 2.5% per cent
7. SCALE 5 Mortgages:
For negotiating the terms of mortgages or charges as an intermediary between or on behalf of either of the principals:
a) In case of a successful deal, the agent is entitled to a negotiated commission but no fees.
b) Where agent is instructed to fund and negotiate a mortgage without handling the sale: Fees to be not more than 0.25% per cent of the capital value of the mortgage.
If the above rates drive you to get into real estate, you can start by registering to list your property for free. Also remember to get your letter of authority to sell as described so that you do not miss your commission.
As you continue engaging in real estate, remember to register with the Estate Agents Registration Board(EARB). This way, you have legal protection in case the seller does not meet their obligations. We have had cases of real estate agents getting low commission than what the law mandates since they were not registered as real estate agents in Kenya. If you are not registered, you risk losing your hard-earned commission and lack good legal support. You may also face legal penalties.
Learn more about the benefits and how to register as a real estate agent in Kenya.
Section 18 of the Estates Agents Act Cap 533, Laws of Kenya provides as follows: -
1. After the expiration of six months from the commencement of this Act or such further period as the Minister may, by notice in the Gazette, allow either generally or in respect of any particular person or class of person: -
· No individual shall practice as an estate agent unless he is a registered estate agent;
· No partnership shall practice as estate agents unless all the partners whose activities include the doing of acts by way of such practice are registered estate agents;
· (c)
2. Any person who contravenes subsection (1) shall be guilty of an offence and liable to fine not exceeding twenty thousand shillings or to imprisonment for a term not exceeding two years or to both.
While the above is developed for a general understanding, it is not meant to be legal advice. Do not hesitate to contact your advocate for legal help. If you need one, you can real out to us on 0726982982 or on email [email protected].
Do I have to pay KRA any withholding tax for my commissions?
Yes, management or professional fees attract a withholding tax of 5%. You will also be required to declare your income(s) and the withholding tax details when filing your annual tax returns and to pay any tax balance due.
5 different types of real estate taxes are charged in Kenya.
4. Stamp duty
Stamp duty, provided for under the Stamp Duty Act, Cap 480, is a tax payable on
various instruments. Stamp duty is charged on instruments relating to land such
as transfers, charges and leases on land. The
rate of stamp duty is based on the instruments, the user of the
property and the time of payment among others. There are various exemptions to
payment of stamp duty granted under the Stamp Duty Act.
5. Value Added Tax (VAT)
Value Added Tax (VAT) is chargeable on commercial rental income and is charged to the tenant at a rate of 16%. Under that Value Added Tax Act, VAT is payable on the sale of commercial land at the standard rate of 16%.
In 2018, however the High Court ruled that VAT is not payable on the sale or purchase of land, irrespective of the nature of buildings standing (whether residential or commercial). The high court relied on the VAT Act (VATA) 2013, that specifically exempts the ‘supply by way of sale, renting, leasing, hiring, letting of land or residential premises’ from VAT. It will be interesting to see the results if/when KRA appeals this verdict.
As property taxes play a crucial role in home ownership, this should be a key area of consideration by policy makers to ensure that the objectives of the affordable housing agenda are realised as envisaged by the Government. The tax regime in Kenya can be quite confusing unless you are a seasoned real estate or tax professional. Please seek expert opinion when conducting your real estate transactions. You could alternatively give us a call for a free consultation.
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Resident landlords receiving rent income of between Kshs. 288,000 and Kshs. 15 million per annum
Late filing of MRI returns attracts a penalty of 2,000 or 5% of the tax due whichever is higher for individuals and 20,000 or 5% of the tax due whichever is higher for corporates and subsequent interest of 1% per month on the unpaid tax until payment is made in full.
Penalty on late payment: 5% of the tax due and late payment interest of 1% per month on the unpaid tax until the tax is paid in full.
As you engage in real estate, its always important to consider the impact of taxes on your transactions. To remain compliant, please consult your tax or legal expert. For more information, please call David Ndiritu on +254 721 949 580 or via email on [email protected]
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