Inland Revenue Department is going tighten rental tax of properties rent out for commercial purposes by landowners to expand the tax net from mi-March by introducing a floor-price.

“We are all set to tighten rental tax in a month by fixing a standard price for the commercial buildings’ rent,” director general at the department Tanka Mani Sharma said, adding that the department has discovered that the landowners have submitted papers reducing the real rent down to 90 per cent to escape tax compliance.

“The department is preparing floor-price to reduce the current trend of under reporting in the tax liabilities,” he informed, saying the landowner cannot prepare papers stating ‘surprisingly lower’ rent to escape tax liability after the introduction of floor-price.

“Landowners from downtown have submitted paper stating only Rs 5,000 to 10,000 as rents but the department has discovered the real rental price to be as high as Rs 0.1 million or more,” he added. “They are paying the government peanuts compared to the real rent.”

The department is planning to check rental tax of all the department stores, malls, shopping complex and other buildings used for commercial purpose.

“Landowners who rent, lease or license immovable property for commercial purpose will have to pay the 10 per cent tax on the rental charge,” according to the department that is also making the landowners of residential purposes also responsible in paying tax.

“It is introducing the system of paying rent tax on monthly basis like telephone bill, drinking water bill or electricity bill, Sharma said. “The existing legal provision has made tenants responsible for tax compliance but the department is bringing the provision of making house-owner more responsible.”

Meanwhile, the department is also preparing to padlock finance and administrative section of educational institutions that have not paid education service tax. “The government has projected Rs 250 million revenue from education tax,” he said. “But only Rs 80 million has been mobilised until last month. The department will bring all the educational institutions into tax net from February.”

source: The Himalayan Times, 17 Jan 2012