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Audit, tax and WIP accounting for construction & real estate

For contractors, developers and property managers: audits, KRA compliance and WIP records for real estate and building projects that hold up under review.

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Construction and property businesses run long projects, carry large supplier and subcontractor bills and, in property management, hold money that belongs to someone else.

Adamjee Auditors provides audit, tax and accounting support to contractors, developers and property managers from our offices in Nairobi's Westlands and in Mombasa. Our partners' experience includes construction and real estate development, and our engagements are partner-led, with audits carried out to ISA and IFRS.

Much of the difficult work sits in work in progress. How the costs of materials, labour, overheads and subcontractors build up on a project, and how revenue is recognised as it advances, decides the profit you report and the tax you pay. Our audits test balances, controls and disclosures, and in this sector that means checking WIP schedules against project progress and the invoices behind them.

For property managers, the discipline is separation. As our guide to property management financial reporting sets out, landlord funds should never be mixed with management revenue, and service charges are pass-through funds kept in their own accounts, not profit. Independent audits and agreed-upon procedures give owners, lenders and boards a view of those records they can rely on.

Sector challenges

Where construction and property accounts go wrong

Work in progress that moves profit

Understated WIP raises taxable profit now; overstated WIP risks KRA disallowing the deferred benefit. Under IFRS 15, revenue on construction contracts typically follows the percentage of completion, so progress has to be documented.

Costs without eTIMS invoices

From 1 January 2026, KRA disallows expenses not supported by eTIMS-compliant invoices. Materials and subcontractor costs held in WIP need e-invoices behind them, checked before they are posted.

Site labour paid in cash or M-Pesa

Daily-wage workers, weekly-paid trades, project contracts and subcontractors each need different treatment. Weak attendance and payment records invite ghost workers and inflated wage claims, and subcontractor payments may attract withholding tax.

Other people's money

Rent belongs to landlords and service charges are held for estate costs. Mixing either with management revenue erodes trust, and gaps between declared rental income and bank inflows are a primary KRA audit trigger.

How we help

Services for construction and real estate

Audit & Assurance

Statutory, external and internal audits. Statutory and external audits are conducted to ISA and IFRS and end in a clear opinion, and every audit brings practical findings on project costing, WIP and controls. Agreed-upon procedures where owners or lenders need assurance over specific financial information.

Tax Compliance

Corporate, VAT, PAYE and withholding tax returns, tax health checks, and advice on the tax implications of transactions such as property disposals, where capital gains tax and stamp duty come into play.

Accounting Services

Bookkeeping, reconciliations, management accounts and IFRS-compliant financial statements, with project-level cost records that keep WIP schedules complete and audit-ready.

Payroll

Monthly payroll with PAYE, NSSF, SHIF and statutory deductions, plus advice on Kenyan labour and tax law for site and estate staff.

CFO & Business Advisory

Cash flow management and financial modelling across projects, and the investor and board reporting that lenders expect.

Our articles on construction and property

Accounting

Construction & Real Estate: Correctly Accounting for “Work in Progress” to Avoid Tax Shocks

Mar 1, 2026

Tax

Tax Advisory for Construction Companies in Kenya

Mar 24, 2026

Tax

Real Estate Tax Advisory: Mastering Capital Gains and WIP Accounting

Apr 26, 2026

Reporting

Why Property Management Financial Reporting Matters in Nairobi

May 27, 2026

Payroll

Construction Payroll: Managing Contract Workers in Kenya

May 28, 2026

All articles →

Common questions

Construction and real estate questions, answered

WIP is the cost of construction or development projects that are not yet complete but have already incurred expenses: materials bought for the project, direct labour, allocated overheads and subcontractor costs. Because it affects the profit reported in the financial statements, misreporting WIP can either inflate profit and taxable income or understate profit and distort cash flow planning.

Under IFRS 15, construction contracts typically follow the percentage-of-completion method, so revenue and profit are recognised in proportion to how far the project has progressed. That needs detailed progress tracking and milestone documentation. A stage-of-completion approach, which measures physical progress or deliverables, suits projects with phased deliveries. Whichever method you use, document the assumptions and reconcile WIP to physical progress reports each month.

From 1 January 2026, KRA disallows expenses that are not supported by eTIMS-compliant invoices. For contractors and developers that includes materials and subcontractor payments held in WIP, so supplier and subcontractor invoices should be recorded through eTIMS and reviewed before they are posted to WIP accounts.

They can. Payments to subcontractors and suppliers may attract withholding tax, and in many cases contractors must deduct it when paying subcontractors and remit it to KRA on time. Keep contracts, payment vouchers, attendance sheets and supplier invoices on file: failures can lead to KRA penalties, tax reassessments and disallowed expenses.

Service charges are fiduciary funds collected from tenants for estate maintenance and operations, such as security, cleaning, common-area water and electricity, and repairs. They belong in separate service charge accounts, supported by monthly expense breakdowns, invoice-backed expenditure records and a reconciliation of unused balances. They are pass-through funds and must never be treated as profit.

It depends on the asset and the business. Capital gains tax applies to gains on the disposal of property, shares and other chargeable assets, while profits from regular business operations are taxed as corporate income, with different returns and deductions. For capital gains tax, the costs of acquisition, improvement and selling are deducted from the proceeds, and stamp duty is due on land or property transfers. Misclassifying a disposal, or missing improvement costs, often leads to overpaying.

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Talk to us about your projects or portfolio

Speak to our team in Nairobi or Mombasa about audit, tax or accounting for your construction or property business. Tell us what you need and our team will respond promptly.

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