Dwellers in Addis Ababa who generate income from business or residence rental houses have been ordered by the Ethiopian Revenue and Customs Authority (ERCA) to report their revenue and pay relevant taxes.
Tax collection from landlords who rent their private homes has remained negligible while the number of rental houses has increased tremendously, due to the persistent housing problem of the city, and the authority hopes to reverse this. The revenue office is working to incorporate people who rent their houses into the tax network, just like other businesses.
Ephrem Mekonnen communication manager of ERCA told Capital that the authority has given a 90 day window for renters to report their revenue and number of rental houses they have.
“To encourage the registration we have lifted the back tax payment that was expected from renters,” Epherem said.
Over the past few years the government has been working to expand income collected from tax. At first ERCA was focusing on the business community to increase its tax revenue but now it is expanding to other income generating sectors of the society.
During the past week, the authority contacted dwellers through woreda revenue administrations and asked them to reveal the revenue they earn from renting houses as well as to specify the number of houses they have for rent.
A dweller who lives in Saris area told Capital that a week ago the area woreda revenue administration distributed a paper informing people of the need to register rental houses.
The authority announced that any resident who receives income from renting houses should appear at the area revenue office with the rent contract, other related documents and tin number.
According to the announcement, the registration is open for three months until February 22, 2011. Once the deadline passes, however, a fine will be assessed that will include back tax due from the previous fiscal year.
The communication head says the authority is working on a detailed investigation on each individual that has rental houses in the town including obtaining an accurate amount of income they earn from the property.
If residents do not use this registration opportunity or under report their revenue, ERCA will take legal measures and revoke their agreement of not charging back taxes; they say this will be strictly enforced.
Ephrem explained that the tax that will be imposed on landlords is dependent on the amount of their total revenue. Costs for home furnishings and other associated expenses are excluded from the total revenue.
“People who rent homes and generate below 1,800 birr annual revenue from the rent are free from the rental tax due but they still must register,” he insisted.
In the current fiscal year, ERCA plans to collect 54 billion birr in tax revenue from all types of business. In the first quarter of the fiscal year the authority collected 11.07 billion birr, while the target was to collect about 12.02 billion birr.
Taxes and tariffs imposed on the import businesses were the major source of income. Over the past three months they made up about 53 percent. Domestic businesses have contributed around 47 percent.