What is Rent Income? Rent income is money or payment received from the privileges granted to another person for the use or occupation of a house.
What is Residential Rental Tax Income?
it is a tax payable by a resident individual 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.
Landlords with rental income below Kshs. 288,000 are not required to pay rental tax and those who get above Kshs. 15 million per year are required to file annual income tax returns and declare rental income together with income from other sources if any.
What is the Monthly Rental Tax Rate?
Residential rental income is charged at a flat rate of 10% on gross rent received per month. A landlord is required to file the rental income without deducting the expenses, losses, or capital allowances from gross rent and pay the principal tax on or before the 20th of the following month
Taxation of Residential Rental Income under the Annual Regime
Taxpayers who wish to remain under the annual rental income tax regime may elect to do so by writing to the Commissioner, under the annual regime the landlord is allowed under section 15 Of the Income Tax ACT to claim expenses incurred to generate the income.
Rental income for commercial buildings attracts also a Value added tax under VAT ACT (no 35 of 2013)
What is the penalty for late filing and late payment of MRI?
Returns are filed and tax is payable on or before the 20th of the following month.
Penalty on late filing: Late filing of MRI returns attracts a penalty of:
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 file nil returns for months of not receiving Rent?
Yes, a Nil return should be filed to cover the months not receiving rent.
Should I disclose my Monthly Rental Income when filing my annual return?
Monthly Rental Income Tax is the 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.
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