KRA penalties are punitive to discourage taxpayers from tax evasion. KRA property data collection is aimed at weeding out non-compliant landlords.
- Starting January 1, 2024, there will be a 7.5% final tax on all rent received. However, the rate is 10% until December 31, 2023. You cannot deduct any expenses, losses, or capital gains from your rent.
- The KRA data collection exercise seeks to collect rental tax from noncompliant landlords.
- KRA agents are required to identify themselves before requesting personal information from landlords.
Landlords can self-assess and register a property via the KRA I-tax portal.
Kenyan landlords are required to file Monthly Rental Income (MRI) tax returns under the Finance Act of 2015. Anyone earning an annual rental income of more than Ksh 280,000 but less than Ksh 15 million is subject to the tax.
However, not all landlords have been diligent about self-reporting and filing taxes. As a result, KRA launched a data collection exercise in 2022 to boost rental tax collection. The KRA data collection on rental properties began in Nairobi but is expected to expand to other areas in order to increase the tax revenue collected from rental income.
How Can Landlords Navigate KRA’s New Data Collection Exercise for Rental Properties?
Landlords can also self-register their properties on the KRA website using the i-tax portal to ensure rental tax compliance. This saves you from having to wait for KRA officers to visit your property.
How does KRA collect rental income data, and what should landlords do to ensure compliance?
The KRA data collection exercise is expected to have a significant impact on KRA’s income tax net earnings. As a result, landlords whom KRA agents have not visited should prepare for the exercise. KRA plans to deploy tax officers who will identify themselves to landlords and property owners using KRA staff identification cards.
The guidelines for collecting KRA rental data are vague. However, according to the online property self-registration procedure, you must first enter your PIN before the tax officers can access your information from their system. Aside from that, it is best to be on-site for physical data collection when KRA officers visit your property.
Are there penalties for failing to comply with KRA rental tax regulations?
Yes. Late filing of MRI returns incurs penalties as follows:
- Ksh 2,000 or 5% of the tax due, whichever is higher for individuals and Ksh. 20,000 or 5% of the tax due, whichever is higher for body corporations
- Late payment penalty is 5% of the tax
- Late payment interest is 1% per month or part of the month.
How Do Landlords Accurately Calculate and Declare Rental Income to Avoid KRA Penalties?
Currently, landlords must file their monthly rental income (MRI) tax returns by the 20th of the following month. For example, rent received in January should be declared and the tax remitted by February 20th.
When you file your monthly tax returns online through I-Tax, the tax payable is automatically calculated at 10% (7.5% beginning January 1, 2024) based on gross rent. If a landlord does not receive any rent in a given month, they may file a NIL return.
Landlords can also file the MRI through the KRA M-service App, and they must remit the tax payable amount within five working days of the deduction.
Are there any changes or updates to the KRA rental tax regulations that landlords should be aware of?
The final tax rate is 7.5% of gross rent received, effective January 1, 2024 (the current rate is 10% until December 31, 2023). The tax should be paid by the fifth working day after the deduction is made.
Furthermore, the Commissioner may terminate this appointment at any time. There are no expenses, losses, or capital deductions allowed against gross rent.
Exemptions from MRI;
- Rental income from commercial property
- Non-resident landlords
- Landlords who earn rental income over 15,000,000 per year.
Are there any professional services or resources available to help landlords navigate KRA rental tax requirements?
Yes. If you are unable to file your own monthly rental income tax returns, a tax accountant can help you do so. You can also contact KRA customer service for assistance.
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