Effect of Rental Income Tax on Financial Performance of Real Estate Sector in Kenya

Abstract

This study examines the effect of rental income on the performance of Real Estate Sector in Kenya over the past decade. In the study, a time series data from the last decade was obtained from Kenya Revenue Authority, Hass Consult and World Bank Website. The main objective of the study is to establish the effect of rental income tax on financial performance of real estate sector in Kenya. The specific objective of the study is to establish the influence of rental income tax on the performance of real estate sector in Kenya, to determine the influence of technological advancement of the performance of real estates in Kenya, to obtain the impact of inflation, taxation rate and penalty on the performance of real estate performance in Kenya. A regression model was conducted to establish the relationships between independent and dependent variables. Findings revealed that rental income has a significant influence on the financial performance of real estate sector in Kenya. This after the p-value of the study indicated that is its 2.1% against the statistical significance level of 5%. According to the study, technological advancement was the main influencer in the performance of real estates in Kenya after the p-value indicated 2.7% against the statistical significance level of 5%. Further, the study revealed that inflation, penalty each had 2.7% against 5% statistical significance level of 5%. They contribute significantly to the performance of real estates in Kenya. However, the rate of taxation does not make any significant contribution to the performance of real estates in Kenya. This was occasioned by the fact that the rate of income taxation on rental was constant throughout the study. Therefore, the contribution of Taxation rate is nil. The study recommended that more study studies should be conducted to establish the contributions of technological advancement, inflation, penalties and fines on the performance of other branches of real estate. The study also recommended that technological advancement should be given a priority by the Taxation Authority (KRA) to continue boosting the Revenue in the economy.