Kenyan landlords could face penalties ranging from Ksh 2000 to over Ksh 50000 from the Kenya Revenue Authority (KRA) for late filing and payment, according to the Monthly Rental Income (MRI) law.
The KRA’s MRI tax is administered by the Kenya Revenue Authority and applies to residential rental income earned within Kenya.
It was introduced under the Finance Act 2015, became effective on 1 January 2016, and is payable by a resident person (an individual or a company) on rental income accrued or derived in Kenya from the use or occupation of residential property.
Following the Finance Act 2020, the Monthly Rental Income (MRI) tax applies to individuals and companies earning residential rental income above Ksh 280,000 but not exceeding Ksh 15 million per year, effective 1 January 2021.
Taxpayers within this bracket may opt out of MRI by giving written notice to the Commissioner, in which case they are taxed under the standard annual income tax regime.
Property owners earning more than Ksh 15 million annually are required to declare rental income, along with other sources of income, when filing their annual income tax returns.
KRA Rental Income Tax Rates
According to the Kenya Revenue Authority, the Monthly Rental Income (MRI) tax applies to residential rental income earned by landlords in Kenya within the prescribed income threshold.
KRA states that the tax is charged at 7.5% of gross monthly rent, effective 1 January 2024. It is classified as a final tax, meaning no deductions for expenses, losses, or capital allowances are allowed.
The authority notes that the MRI applies to resident landlords earning between Ksh 280,000 and Ksh 15 million annually.
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Landlords earning above Ksh 15 million are taxed under the standard income tax regime, while commercial rental income and non-resident landlords are excluded.
KRA requires landlords to file monthly returns by the 20th of the following month and remit tax via the iTax system.
Late filing or payment attracts penalties, including fixed fines, percentage-based charges on tax due, and monthly interest on outstanding amounts.
Penalties and Filing Requirements for Rental Income Tax
According to the Kenya Revenue Authority, late filing of Monthly Rental Income (MRI) returns attracts a penalty of Ksh 2,000 or 5% of tax due for individuals, whichever is higher, and Ksh 20,000 or 5% of tax due for companies, whichever is higher.
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Late payment attracts a penalty of 5% of the tax due, in addition to interest charged at 1% per month or part thereof on outstanding amounts.
The filling steps are as follows:
- Log in to the iTax system
- Select “File Return” under Income Tax – Rental Income
- Choose return type (original or amended)
- Enter monthly gross rental income and property details
- System automatically computes tax at 7.5%
- Submit the return by the 20th of the following month
- Generate a payment slip and complete payment through approved channels
