KRA Explains Who Qualifies for Rental Income Tax Exemption as Landlords Seek Clarity

The Kenya Revenue Authority (KRA) has clarified the rental income tax rules for landlords, explaining who qualifies for an exemption and the amount others are expected to pay. The guidelines are part of the tax measures for the 2026/2027 financial year and aim to help property owners understand their obligations.

According to the Authority, landlords earning less than KSh 24,000 per month from residential properties fall outside the Monthly Rental Income (MRI) tax regime. This means their annual rental income is below KSh 288,000, placing them under the exemption threshold for this particular tax.

However, the exemption does not automatically mean that landlords have no other tax obligations. Depending on their circumstances, they may still be required to declare their income under the annual income tax rules.

Landlords earning between KSh 288,000 and KSh 15 million annually from residential properties are required to pay MRI tax at a rate of 7.5% of their gross rental income. The rate took effect on January 1, 2024, and the tax is calculated on the total rent received before expenses are deducted.

This means property owners cannot subtract costs such as repairs, maintenance or other business expenses when calculating their MRI tax. They should therefore understand the applicable rules and keep proper records of the rent they receive.

Landlords whose annual residential rental income exceeds KSh 15 million fall outside the MRI regime. They are required to declare their earnings under the annual income tax system instead.

The rules also treat commercial properties differently. Income from shops, offices and industrial buildings is excluded from the MRI regime, regardless of the amount earned, and is handled under the applicable income tax rules.

Non-resident landlords face separate requirements under the framework introduced by the Finance Act 2026. They are subject to a final tax of 30% on gross rental income earned from immovable property in Kenya, with returns and payments due by the 20th day of the following month.

KRA has also reminded landlords who fall within the MRI tax bracket to observe the monthly filing deadlines. For example, rent received in September must be declared and the applicable tax paid by October 20.

Those who miss the filing deadline risk a penalty of KSh 2,000 or 5% of the tax due, whichever amount is higher. Late payments attract a 5% penalty, while interest of 1% per month continues to accumulate on the outstanding balance until it is paid.

In addition to income tax, the guidelines highlight the Affordable Housing Levy, which applies at 1.5% of gross rental income for eligible landlords. Property owners need to establish whether the levy applies to their circumstances and comply with the relevant requirements.

To make the process easier, KRA has introduced the Electronic Rental Income Tax System through eCitizen. The platform is intended to help landlords register, file their returns and make payments more conveniently.

The clarification gives property owners a clearer picture of the rules based on their income levels and the type of property they rent out. Landlords are encouraged to review their earnings, confirm the tax category that applies to them and meet the relevant deadlines to avoid unnecessary penalties.

Tuko News.https://www.tuko.co.ke/business-economy/643996-kra-clarifies-rental-income-tax-rules-landlords-earning-ksh-24000/