Ultimate Guide to Monthly Residential Taxation of Rental income in Kenya
Residential rental income, also known as
Monthly Rental Income (MRI) refers to income derived from renting out
residential properties for use or occupation. This tax applies to individuals and corporates
with residential property only. Effective 1st January 2021, the Finance Act 2020 requires every resident landlord receiving rent income of between Kshs. 288,000 (Kshs. 24,000 per month) and Kshs. 15 million per
annum are obligated to file and pay for MRI at 10% of the gross rent received either monthly, quarterly, semi-annually or annually. The return must
still be filed monthly. No expenses, losses or
capital allowances are allowed for deduction from the gross rent at the time of
filing the return. Therefore, a landlord earning gross rent of Ksh. 100,000 in
a month will be required to pay rental income tax at the rate of 10%, that is
10%*100,000=10,000.
Taxpayers within this bracket who wish to remain in annual rental income tax regime may do so by
requesting the Commissioner in writing. The MRI return is filed on iTax or using the new KRA M-service App , on or before the 20th day
of the following month. For example, rent received in January is declared and
tax paid on or before 20th February. Further, any month that
the landlord does not receive any rent, he/she is required to file a NIL
return. You
can pay via Mpesa by using KRA PIN number 572572 and the account Number been the Payment
Registration Number quoted at the top right corner of the
generated payslip.
Landlords with rental income below Kshs.
288,000 or above Kshs. 15 million per year and non-residents shall file annual income tax
returns and declare rental income together with income from other sources.
Residential rental income is final tax. This means
that, any income from rent that is subject to residential rental income tax is
not liable to any other tax under the Act and therefore, persons are not
required to declare the same in their annual income tax returns.
Late filing of MRI returns attracts a penalty
of 2,000 or 5% of the tax due whichever is higher for individuals and 20,000 or 5% of the tax due whichever is higher for corporates and
subsequent interest of 1% per month on the unpaid tax until payment is made in
full.
Penalty on late payment: 5% of the tax due and late payment interest of 1% per month on the
unpaid tax until the tax is paid in full.
As you engage in real estate, its always important to consider the impact
of taxes on your transactions. To remain compliant, please consult your tax or
legal expert. For moreinformation, please call David Ndiritu on +254
721 949 580 or via email on dndiritu@hisibaticonsuting.com