The following are the common questions and answers for Residential Rental Income Tax (MRI)
The effective date of Monthly Rental Income Tax?
With effect from 1st January 2016.
The legal framework governing the Monthly Rental Income Tax?
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 (individual or company) from income which accrued in or derived from Kenya for the use or occupation of residential property'.
What are the advantages of the simplified regime?
- Taxed at a flat rate of 10%.
- No complex bookkeeping and record keeping required, thus very cost-effective.
- Monthly Residential Rental Income Tax is a final tax.
Who is eligible to pay the Residential Rental Income Tax?
This is tax payable by resident persons (individual or company) on rental income earned for the use or occupation of a residential property where the rent income is between Kshs. 288,000 (Kshs. 24,000 per month) and Kshs. 15 million per annum.
What happens if I have both Commercial and Residential Income?
A simplified rate of 10% tax on gross will only apply to the Residential Rental Income Tax segment subject to the lower and upper limits. Rental income from commercial properties shall be assessed using the old regime i.e. one has to prepare the Profit and Loss Account to ascertain the gains for the year, then effect income tax at the rate of 30% for corporates.
What is the rate of Residential Rental Income Tax?
The tax rate is 10% on the gross rent collected during the month. Please note that you are NOT allowed to offset any expenses (both direct and indirect), losses or capital deduction allowances from the gross rent.
What are the exemptions from Residential Rental Income Tax?
- All persons earning less than Kshs.24,000 per month or Kshs.288,000 p.a. (lower limit) or earning higher than Kshs.15Million per year (higher limit) are not eligible to pay the MRI.
- Rental income from a commercial property is also exempted from MRI.
- Non-resident landlords
- Upon writing to the commissioner giving grounds for opting out of this simplified tax regime.
How do I compute Residential Rental Income Tax from Partnership Income?
Each partner is eligible to pay 10% of the Gross monthly rental income share received, however the individual shared income must be over Kshs.288,000 per annum but less than Kshs.15 Million.
What do I do if a client (appointed withholding rental income tax agent) withholds 10% rent?
You need to offset the withholding tax credit(s) from the total liability payable for the month in question.
When do I pay the Monthly Rental Income Tax?
MRI becomes payable when you receive the rent cash. This may be monthly, quarterly, semi-annually or annually. MRI becomes payable on or before 20th of the following month from the date of receipt i.e. Rent received in January 2022 was payable by 20th of February 2022.
Should I file nil returns for months not receiving Rent?
Yes, a Nil return should be filed to cover the months not receiving rent.
What is the penalty for late filing and late payment of MRI?
Date: Returns are filed and tax payable on or before the 20th of the following month.
Penalty on late filing of MRI Returns:
- 2,000 or 5% of the tax due whichever is higher for individuals.
- 20,000 or 5% of the tax due whichever is higher for corporates.
Penalty on late payment:
- 5% of the tax due and
- late payment interest of 1% per month on the unpaid tax until the tax is paid in full.
Should I disclose Monthly Rental Income when filing my annual return?
Monthly Rental Income Tax is a final tax and should not be disclosed again when filing the annual returns. If no other income other than the MRI, an individual should file a Nil return.
Can I pay via MPESA?
Yes, once you generate the E-slip, select Lipa na Mpesa, Paybill #,572572, for account number, select the payment registration (PRN) number, then enter the amount, then pay.
What is the Information required for the Monthly Rental Income (MRI) Tax Payer?
- LR No.
- List of current Tenants
- Amount payable for the Month
- Physical Location of the houses i.e. Street/ Road, City, County, District, Tax Area, the nearest land mark
- P.O Box & Postal Code
- Name of the Building
- PIN of Tenants (not a mandatory field)
