Rents are payments made by tenants to the landlords for using immovable property such as a house. It is paid upon the occupation of the property on the timelines stipulated in your agreement; either monthly, quarterly, semi-annually or annually.
Landlords are expected to remit taxes in form of Residential Rental Income Tax or Monthly Rental Income Tax (MRI) after collecting rents from the occupants of their property.
These taxes are calculated at a flat rate of 10% on gross rent received per month, but non-residents, landlords earning below Ksh288,000 and more than Ksh15 million yearly in rents are exempted from filing Rental Income Tax.
Do landlords pay tax in Kenya?
Yes, landlords pay Residential Rental Income Tax or Monthly Rental Income Tax charged on a scale of 10% on gross rent received.
How can you file for Rental Income Tax in Kenya? Landlords file their tax returns via iTax or KRA M-service App, where they declare their gross rent and payable tax automatically computed. If rent is not received in a particular month, KRA NIL returns are filed.
Rental income is filed before or on the 20th of every month. For instance, if a landlord collects rent on the 1st of January, they are expected to pay their taxes before or on the 20th of February.
How much rental income is tax-free in Kenya?
Rental income below Ksh288,000 per annum or exceeding Ksh15 million per year is tax-free in Kenya. Landlords who fall in this bracket are expected to file their annual returns alongside income from other sources.
Is rental income final tax in Kenya?
Yes. Rental income tax is a final tax. But what is a final tax in Kenya? These are taxes that cannot be imposed an extra duty on the scales of other taxes such as income tax or capital gains.
They are subject to be calculated once on the existing rental income rates and not other rates of Individual Income Tax or Pay As You Earn (PAYE).
Thus, persons are not required to declare the same in their annual income tax returns.
Rental income tax penalty on late payment
Failure to file rental income tax returns or making late payments attracts severe penalties, and landlords are encouraged to file their returns on time to avoid the charges, which can, in turn, hit hard on their businesses.
What happens when you make a late filing on Rental Income Tax or Monthly Rental Income Tax? Late filing will attract a charge of Ksh2,000 or 5% of the tax due for individuals and 20,000 or 5% of the tax due for corporates.
On the other hand, those who make late payments of rental income tax will be imposed a penalty of 5% of the tax due, and the unpaid tax will accrue interest of 1% per month until it is paid in full.
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