What is Monthly Rental Income (MRI)
A simplified tax regime on residential rental income known as Residential Rental Income Tax (popularly known as Monthly Rental Income or MRI was introduced through the Finance Act 2015 and came into effect on 1st Jan 2016.
What is Rent?
Rent means payments received from a right granted to another person for use or occupation of immovable property which includes premium or similar consideration received for the use or occupation of property.
Who is eligible for MRI?
MRI is payable by a resident person (individual or company) on rental income accrued or derived in Kenya for the use or occupation of residential property.
Following the enactment of the Finance Act 2020, MRI is applicable to persons earning rental income which is in excess of Kshs. 280,000 but does not exceed Kshs. 15,000,000 during any year of income. with effect from 1st January 2021.
However, a person may elect, by notice in writing to the Commissioner, not to be taxable under MRI in which case the annual income tax regime shall apply to such a person.
Property owners with rental income above Kshs. 15 million per year will be required to declare the rental income together with incomes from other sources (if any) while filing their annual income tax returns.
What is the MRI tax rate?
The rate of tax is 7.5%, effective 1st January 2024, on the gross rent received and is final tax. No expenses, losses or capital deductions are allowed for deduction from the gross rent.
Exemptions from MRI
- Rental income from commercial property
- Non-resident landlords
- Landlords who earn rental income in excess ofKshs.15,000,000 per year.
When is MRI Return and Payment Due?
Where a person deducts MRI he shall within five working days after the deduction was made remit the amount so deducted to the Commissioner together with a return in writing of the payment of the amount of tax deducted.
Penalties applicable to MRI?
- Late filing of MRI returns attracts a penaltyas follows:
For individuals – Kshs. 2,000 or 5% of the tax due whichever is high, for body corporates -Kshs. 20,000 or 5% of the tax due; whichever is higher
- For Late paymenta penalty of 5% of the tax
Late payment interest is 1% per month or part of the month.
How do I file for Residential Rental Income?
Rental Income is filed on or before the 20th of the following month. For example, rent received in January is declared and tax paid on or before 20th February.
Complete a monthly tax return online via iTax by declaring the gross rent and tax payable will be computed automatically.
For any month that the landlord does not receive any rent he/she shall file a NIL return.
Residential rental income is final tax therefore, persons are not required to declare the same in their annual income tax returns.
You can now also file and pay your monthly rental income tax using the new KRA M-service App.