The Finance Act 2015 introduced a new Section 6A in the Income Tax Act Cap 470 Laws of Kenya, which provides for a simplified tax regime on rental income. The tax to be known as residential rental income tax shall be payable by any resident person from income which accrued in or was derived from Kenya for the use of residential property and which does not exceed Kshs 10 million during any year of income.
Residential rental income tax is charged at a rate of 10% of gross rent received on monthly basis. No expenses will be allowed for deduction. The simplified tax at 10% will be a final tax. Landlords falling in this regime will not be subjected to further taxes on the residential rental income declared. In addition, eligible landlords shall not be required to file annual returns unless one has other incomes e.g. commercial rent, business income, farm income, etc.
The 10% tax on gross rent will be payable on monthly basis on or before the 20th day of the month following rent collection. Any tax not paid by the monthly due date will attract penalties and interest as specified in the current Income Tax Act.
Yes, the tax applies to all persons (Individual or Company) whose rental income from residential property is below the Kshs. 10 million per annum. However, landlords who wish to remain in the current tax regime can elect in writing to the Commissioner, to be taxed under the current tax rates.
Landlords who choose to remain in the normal tax regime shall pay installment taxes and file annual returns as required.
Yes, if you are in the new tax, it will be possible to change back to the normal regime provided a taxpayer applies in writing to the Commissioner before 31st December each year. However, there will be no changing of regimes during the year.