Monthly Rental Income tax for landlords
How a Kenyan residential landlord files and pays Monthly Rental Income tax: who it covers, the rate on gross rent, nil returns and penalties.
By Achekam · · 4 min read · For Running a business businesses in Kenya
Kenya taxes most residential rent in a deliberately simple way: a flat percentage of the rent, filed and paid every month, with no expenses to calculate or argue over. For a landlord with a block of bedsitters or a couple of maisonettes, that simplicity is welcome.
Simple is not the same as forgiving. The tax is monthly, so a landlord who files only when rent comes in, or who loses track of one property among several, soon has a string of late returns. This article explains who the regime covers, how the tax is worked out, the filing routine and how to keep the records that make it painless.
Who the regime covers
KRA says Monthly Rental Income tax applies to resident individuals and companies on residential rental income earned in Kenya of not more than Kshs 15 million in a year of income. Landlords above Kshs 15 million declare the rent in their annual income tax return instead.
KRA also says the regime does not apply to rent from commercial property or to non-resident landlords. A landlord who owns both flats and a shop lets the flats under this regime and declares the shop rent in the annual return.
There is also a lower limit, below which the regime does not apply. At the time of writing, KRA's page and the Income Tax Act on Kenya Law state that limit differently, so confirm the current figure with KRA if your rent is modest.
The rate on gross rent
KRA says the tax is charged at 7.5% of gross rent, effective 1 January 2024, as a final tax with no deduction for expenses, losses or capital allowances. The Income Tax Act's Third Schedule sets the same 7.5% of gross rental receipts. Some parts of KRA's own pages still mention an older 10% rate, which has been superseded.
"Final" and "gross" are the two words that shape everything. Repairs, the caretaker's wages, the letting agent's commission and the interest on the loan that bought the building are all ignored. The tax is simply the rate applied to the rent, and once paid, that rent is done with for income tax.
A worked example in words: a landlord lets three flats and receives rent from all three in March. The March return declares the total rent received in March, the tax is 7.5% of that total, and both the return and the payment are due by 20 April.
Whether the regime suits you, or whether the annual regime with its deductions would be better, is a separate question, covered in leaving the Monthly Rental Income regime.
Registering properties and filing each month
KRA says the rent is declared and the tax paid on or before the 20th of the following month: rent received in January is due by 20 February. The return can be filed on iTax or on the KRA M-Service app, but only after each property has been registered on iTax under "Register Property Details".
Register every property before the first return, and add new ones as soon as they are let. A property that is not registered cannot be filed for, which turns an unregistered flat into an unfiled return. Filing from a phone is described in what you can do on the KRA M-Service app.
To pay by mobile money, generate the payment slip on iTax and pay through the Government PayBill 222222, which KRA says is the only paybill for tax payments, using the Payment Registration Number on the slip as the account number.
Nil returns for months without rent
KRA says a nil return is filed for any month with no rent. A vacant property, a tenant who paid nothing that month, or a block between tenancies all call for a nil return, not silence. Missed nil returns block later filing on iTax and can attract penalties, so file them on the same day each month as the returns with tax on them.
Penalties for late filing and payment
KRA sets two separate penalties:
| Failure | Penalty, as KRA states it |
|---|---|
| Late filing | 5% of the tax due, or Kshs 2,000 for individuals and Kshs 20,000 for non-individuals, whichever is higher |
| Late payment | 5% of the tax, plus interest of 1% per month or part of a month |
Because the filing penalty takes the higher figure, a late return with little tax on it still costs the fixed amount. A company that owns residential property and files late pays the larger fixed figure. Check KRA's page for the rules in force when you need them.
Recording rent and tax payments in Achekam
Achekam does not file the return, but it holds the figures the return needs and a record of what was filed and paid.
Rent can be invoiced to tenants as customer invoices: issuing one posts it to the books. Payments are recorded against one invoice or spread across a tenant's invoices; a part payment leaves the invoice part-paid, and any extra is held on the tenant's account. At month end, the receipts recorded for the month give you the rent received to declare.
When the return is filed, a person with the business's KRA filing permission uploads the iTax acknowledgement into Achekam, and a different person verifies it before the return counts as filed. The tax payment is recorded with KRA's Payment Registration Number and receipt. Achekam never generates a payment reference, refuses the discontinued paybill 572572 and needs a second person to confirm the payment.
If tenants who are themselves businesses withhold tax on your rent, see withholding tax on rent paid by tenants.
KRA's page on residential rental income explains who qualifies, the annual rent band, the final tax rate on gross rent and how the tax is filed and paid. Check it at the start of each year, since rates and limits change.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
