Landlords earning below Sh288,000 annually exempted from rental tax, KRA says

The Kenya Revenue Authority (KRA) has released its comprehensive 2026/2027 rental income tax guide, offering fresh clarity on who is required to remit monthly rental income taxes and who is legally exempt from the statutory deductions.

Released on Monday, October 19, the updated guidelines outline specific thresholds governing residential property owners, commercial landlords, high-income earners, and non-resident property investors. Among the most notable updates is a firm reassurance for small-scale residential property owners.

According to the new framework, landlords whose gross residential rental earnings fall below specific thresholds will not be subjected to the Monthly Rental Income (MRI) Tax regime.

Property owners operating on a modest scale can breathe a sigh of relief following the taxman’s clarification regarding low-income earners. The Authority explicitly stated that individuals bringing in minimal rental revenue will not face monthly tax burdens.

“Landlords who earn rental income which is less than Ksh288,000 per year are exempt from Monthly Rental Income (MRI) Tax,” the KRA explained in its official guideline document.

This annual threshold translates to roughly Ksh24,000 per month. Property owners whose total collections stay beneath this limit are shielded from the monthly filing and remittance cycle, easing compliance pressures on informal and small-scale real estate investors.

While small-scale landlords enjoy exemptions at the lower end, the KRA guidelines also address high-tier investors and commercial real estate.

The tax authority noted that landlords earning more than Ksh15 million annually from rental properties are similarly excluded from the standard monthly rental income tax framework, as their portfolios fall under alternative tax classification procedures.

Furthermore, the Authority explicitly clarified that the monthly rental income structure does not apply to commercial real estate. Landlords deriving income from commercial properties such as retail shops, office complexes, and industrial spaces operate under a different segment of the current tax administration system.

For landlords who do not fall under the exempted brackets or high-income exclusions, mandatory compliance remains strictly enforced. Kenyan residential landlords who meet the criteria are required to pay 7.5 per cent of their gross rental income on a monthly basis, a rate that was implemented starting January 1, 2024.

However, the KRA has issued a stern warning regarding how property owners calculate their liabilities. The guidelines explicitly prohibit landlords from deducting maintenance costs, operational expenses, or capital losses when computing their tax obligations.

“No expenses, losses or capital deductions are allowed for deduction from the gross rent,” the taxman clarified, emphasizing that landlords must remit the requisite percentage calculated directly from their total gross earnings without reductions.

In addition to the standard MRI tax, eligible residential landlords must also factor in other statutory contributions. The Authority highlighted that the Affordable Housing Levy, charged at 1.5 per cent of gross rental income, applies across the board to every eligible landlord.

The updated 2026/2027 framework also establishes distinct rules for international property investors. Non-residents earning rental income from properties situated within Kenya are governed by a separate tax system that came into effect on July 1, 2026.

Under these rules, non-resident property owners are required to remit 30 per cent of the total rent collected. The KRA confirmed that this heavy levy applies uniformly to both residential and commercial properties owned by non-residents, covering assets ranging from residential houses to commercial shops and office blocks.

Compliance timelines remain a critical focus for the tax authority. Landlords subject to rental tax are legally mandated to file their returns and complete payments on or before the 20th day of the following month. For instance, rental revenue accumulated during September must be fully declared and settled by October 20.

The KRA warned that failure to adhere to these deadlines carries steep financial penalties.

Late filing attracts a penalty of Ksh2,000 or 5 per cent of the tax due (whichever is higher) for individuals, while delayed payments trigger an additional 5 per cent penalty on the outstanding principal sum. Property owners are thus urged to regularize their filings promptly to avoid punitive enforcement measures.