Kenya Rental Income Tax Guide 2026

Rental Income — 10% Withholding Tax

Rental income from property located in Kenya is subject to a 10% withholding tax on the gross rental amount. The tenant (or property manager) is responsible for deducting the 10% and remitting it to KRA via the iTax portal by the 9th of the following month. For resident landlords with annual rental income of KES 288,000 or less (KES 24,000 per month or less), this 10% WHT is a final tax and no further filing is required. For example, a landlord receiving KES 30,000/month in rent has KES 3,000 withheld by the tenant, leaving the landlord with KES 27,000 net.

Rental Income Above KES 288,000/Year

Landlords with annual rental income exceeding KES 288,000 may choose to be taxed under the normal PAYE or CIT regime instead of the 10% final withholding tax. Under PAYE/CIT, the rental income is included in total income, and the landlord may claim allowable deductions against the gross rent. This option is beneficial when allowable deductions (mortgage interest, maintenance, insurance, land rates, depreciation) significantly reduce the taxable rental income. The 10% WHT already paid is creditable against the final tax liability. Landlords must file an annual return via iTax by 30 June.

Allowable Deductions

Landlords who opt into the PAYE/CIT regime may deduct the following expenses from gross rental income:

• Mortgage interest: Interest on loans used to purchase, construct, or improve the rental property
• Repairs and maintenance: Costs of keeping the property in a habitable condition
• Insurance premiums: Buildings, contents, and landlord liability insurance
• Property management fees: Fees paid to managing agents
• Land rates: Annual county government land rates
• Service charges: Common area maintenance in apartment blocks
• Legal and professional fees: Costs related to rental operations

Capital improvements (extensions, major renovations) are not immediately deductible but may be claimed through wear and tear allowances over time.

Non-Resident Landlords — 30% WHT

Non-resident landlords receiving rental income from Kenyan property are subject to a 30% withholding tax on gross rent. This is a final tax — the non-resident landlord does not need to file an annual return for rental income. The tenant (or property manager) must deduct the 30% and remit it to KRA. No deductions are allowable against the gross rent for non-residents. Reduced rates may apply under double tax treaties (e.g., 15% under the Kenya-UK DTA).

Tenant Obligations

Tenants paying rent of KES 24,000/month or more (or any amount to a non-resident landlord) must:

• Obtain the landlord's KRA PIN
• Withhold 10% (resident) or 30% (non-resident) from the gross rent
• Remit the withheld tax to KRA via iTax by the 9th of the following month
• Issue a withholding tax certificate (Form WHT) to the landlord
• File monthly withholding tax returns

Failure to withhold and remit may result in the tenant being required to pay the tax plus penalties of up to 25% of the tax due and interest at 1% per month.

Record-Keeping

Landlords must maintain proper records of rental income and expenses, including tenancy agreements, rent receipts, invoices for expenses, mortgage statements, and land rate payment receipts. Records must be retained for at least 5 years after the tax year. KRA may request these records during a compliance audit. Under-declaration of rental income is a common audit target, and KRA cross-checks rental data with the Ministry of Lands, the tenant's withholding returns, and the property's land rate records.

FAQs

Is rental income subject to VAT?

Residential rental income is exempt from VAT. Commercial rental income may be subject to VAT at 16% if the annual rental turnover exceeds KES 5 million, though most commercial landlords below this threshold are exempt.

Can I deduct mortgage principal from rental income?

No, only the interest portion of the mortgage payment is deductible. The principal repayment is a capital payment and is not deductible for tax purposes.

What happens if the tenant does not withhold the rental tax?

The landlord remains liable for the tax. KRA may assess the landlord directly for the unpaid tax. The tenant may also be penalised for failure to withhold. Both parties should ensure compliance to avoid penalties.

Disclaimer

This guide provides general information about Kenyan rental income taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Kenyan tax advisor or the Kenya Revenue Authority for advice specific to your situation. InvestmentKit does not provide tax advice.