What you need to know about property tax

Flavia Nanteza, 52, owns a commercial building in Naguru, Kakawa Division. However, during the current valuation of properties in the division by Kampala Capital City Authority (KCCA), she protested the tax KCCA levied on her property arguing that some rooms on the building were empty.
“The officials thought that the entire building was occupied yet there were three unoccupied rooms. My worry was how I could pay high tax yet I actually don’t earn much from the property. I protested and I was advised to lodge my complaint at KCCA’s Valuation Court. When they invited me, I went and argued my case and the chairperson said that they would look into the matter,” she says.

She says about three years ago, she used to pay a high property tax unknowingly because she did not know how systems worked. Natenza’s story is shared by many city landlords who claim they suffered losses in the previous years. Others, are simply puzzled about the tax, wondering how city and town authorities arrive at what they believe are unfair tax rates on their property. Many of these do not know who to appeal to when the tax team comes knocking with a bill they believe is unfair. For any government administrative unit to operate effectively, it needs funding, majority of which is collected locally. One such source of funding is property tax. Property tax is the annual levy on any commercial property that exists within the jurisdiction of the city.

The law
It is charged in fulfilment of the periodic statutory requirement of the Local Government (Rating) Act 2005. The money collected caters for the infrastructural development, among other services.
The Act gives local governments leeway to charge from 1-12 per cent on commercial properties in the city.
The appropriate percentage is set by elected leaders depending on the income which commercial properties make. But the percentages as charged by different cities vary.
For instance, while KCCA charges six per cent property tax, other surrounding municipalities such as Kira, Nansana, and Mukono, charge a higher percentage.

How it is determined
Fred Andema, KCCA’s director of revenue collection, says property tax is determined in two ways. For residential rented houses such as rentals, or apartments, Andema says, they compute the total amount of money such a building makes annually and after all other expenses have been deducted, KCCA taxes only six per cent of the remaining amount.
He explains that for commercial buildings such as arcades, KCCA measures the space in square metres per floor and the amount of money each floor makes annually.

However, areas within the building that do not constitute commercial space in the building are not measured.
The purpose of valuing the space on each floor, Andema says, is to determine how much money each floor makes annually. When the total amount is got, they deduct all the expenses incurred by the landlord on the building and then tax six per cent of the net amount,” Andema says.
The values on which property rates are based are determined by qualified and registered valuation surveyors.

Residentials exempted
However, he says property tax excludes residential houses, registered worship places such as churches and mosques, local council offices, recreational centres, the president’s office and embassies.
But some properties that are partially residential and commercial, will be required to pay property tax of the commercially occupied part.
According to the Act, property owners dissatisfied with the tax levied on their properties are supposed to lodge a complaint at KCCA’s Valuation Court.

Right to appeal
Property owners also have a window to appeal to the Court of Appeal if at all they are not satisfied with the city’s Valuation Court. It is headed by Asuman Basalirwa. Members of this court are appointed by the Lord Mayor and then approved by council.
Basalirwa says while the KCCA valuation team gathers information about different properties in the city and thereafter determine the property tax, the law gives property owners room to protest that tax if it is unfair.

“As court, we sit and see if the complaints made by the landlords merit a reduction in the property tax. After hearing all cases, we then determine how much tax should be exactly paid. Our office at City Hall is always open to receive such complaints,” he says.
After assessing the complaints, Basalirwa says, the Valuation Court makes recommendations to the KCCA’s technical team.
Currently, the valuation exercise is ongoing in the divisions of Rubaga and Makindye. But the Valuation court is open to complaints.

Declaring use of property
For purposes of clarification, KCCA allows city property owners to declare the status of their houses to enable the authority update their tax register.
Andema says owners of residential properties can access Form RF1 forms from the headquarters of all the five divisions of Kampala. He says that it’s free of charge.
“It’s a provision within the law to allow us get the tax record and our role is to let people know that they are entitled to exemption if their houses are only owner occupied,” he says.

He says although this law has been in place, majority of owners of residential buildings are ignorant about declaration of status of the houses they own hence some of them end up paying property tax yet in actual sense, their properties are supposed to be exempted.
To declare the status of residential properties, he says owners will pick the form, fill and then submit it back to the KCCA division where their property is located for verification.
According to the form of the exemption status, residential property owners will be required to fill in their name, physical address, house number, email address, physical address of the rateable property, category of exemption, start date of exemption and end date of exemption, if any, and their signature.

Inspection of property
Upon receipt of this form, KCCA officials then go and inspect the property to corroborate with the information declared by the owner.
“We are concerned about commercial houses captured in our tax register that have since changed to owner occupied status. However, some of them end up ignorantly paying property tax. You need to know the health of the tax register otherwise you could be holding more properties in the tax roll when such properties are actually owner occupied,” he says.
Andema notes that some property owners tend to change the status from residential to commercial, but do not declare the status hence they end up dodging property tax.

Asked about the penalty which defiant residential property owners are likely to face if they do not declare status of their properties, he says there are none except that they could be asked to pay taxes yet they reside in such dwellings and not for commercial purposes.
However, Andema says commercial owners who default on property tax, are prosecuted in courts of law.

He adds that defaulting also attracts a 2 per cent montly interestif one does not pay by end of the year.According to information on the KCCA website, “If a rate is not paid by the date appointed for that purpose, KCCA may cause a demand notice to be served upon the person liable, requiring him or her to pay the rate together with interest, if any, on that rate within two months after the service of the notice.”
He adds that late payment of property tax also attracts a 2 per cent montly interest if one defaults for over a year.

Ground rent
Property rates should be distinguished from ground rent. Fred Andema, KCCA director of revenue: “Unlike Property rates, Ground rent is a charge on land leased out by the Authority [KCCA or town council] whether developed or not”

He adds: “Also, it doesn’t matter whether the property is commercial or residential. As long as it’s on public land, you pay ground rent.”
However, if property on the leased public land is commercial, one is also required to pay property tax. In the city, all public land is in the hands of KCCA. In towns, public land is under the town council. Both ground rent and property tax are paid annually. Although defaulting on property tax attracts a 2 per cent monthly interest, Andema says there are no fines for late payment of ground rent.

[email protected]