Section 6A of the Income Tax Act CAP 470 requires any residential person receiving residential rental income amounting to Kshs. 12,000 and above per month but not exceeding Kshs. 10 Million per year to register for the Monthly Rental Income (MRI) that came to effect from 1st January 2016 payable at the rate of 10% of the gross rental income received.
Residential property owners earning more than Kshs. 10 Million per year are required to declare the rental income in the annual income tax return and make accurate declaration of the rental income received, offset accurate allowable expenses and make timely payment of the tax due.
Commercial property owners should make full disclosure of Commercial rent received under the Income Tax return. Those earning commercial rent of Kshs. 5 Million and above are required to register and pay VAT at a rate of 16%.
We have noted that many property owners are NOT disclosing full and correct information regarding income received from their rental properties to avoid recruitment and payment of rental income tax.
Pursuant to this, all qualified property owners are required to voluntarily make full disclosure of their properties, rental income earned, file accurate returns and make prompt payments of the rental income tax due to avoid punitive penalties and applicable interests.
KRA will apply punitive enforcement measures on all defaulters as stipulated in the Tax Procedures Act 2015 for failure to comply with the provisions of Section 6 and 6A of the Income Tax Act.
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