Kenya’s tax authority, the Kenya Revenue Authority (KRA), has unveiled draft regulations that could significantly reshape the country’s real estate and rental income landscape.
The proposed Income Tax (Residential Rental Income Tax) Regulations, 2026 aim to make it mandatory for landlords to register on a digital tax platform, marking a decisive shift from voluntary compliance to structured enforcement.
Mandatory eRITS Registration for Landlords
At the center of the proposal is the Electronic Rental Income Tax System (eRITS) — a digital platform designed to track, declare, and remit rental income tax.
If adopted, the new rules will require all qualifying landlords to register on eRITS, enabling KRA to:
- Monitor rental income in real time
- Improve compliance levels
- Enhance transparency in the property sector
The regulations are currently open for public participation until May 25, 2026.
Who the New Rules Apply To
The draft regulations target resident landlords earning between KSh 288,000 and KSh 15 million annually from residential rental income.
These landlords fall under the Monthly Rental Income (MRI) tax regime, which requires:
- A flat tax rate of 7.5% on gross rental income
- No deductions for expenses such as maintenance, repairs, or mortgage interest
This simplified tax structure was introduced under the Finance Act 2023 to encourage compliance and ease administration.
Monthly Filing and Compliance Requirements
Under the proposed framework, landlords will be required to:
- File rental income returns monthly
- Pay taxes by the 20th day of the following month
- Maintain accurate records of rental earnings
Failure to comply may attract penalties under existing tax laws.
Integration with Property Managers and Agents
The regulations also reinforce the role of property managers and agents in tax compliance.
Following earlier reforms, agents may be required to:
- Deduct rental income tax at source
- Remit it directly to KRA on behalf of landlords
This creates an additional compliance channel and reduces the likelihood of underreporting.
Digital Shift in Kenya’s Real Estate Sector
The introduction of eRITS reflects a broader push toward digital tax administration in Kenya.
By linking landlords, rental units, and tax records into a centralized system, KRA aims to:
- Expand the tax base
- Reduce revenue leakages
- Improve efficiency in tax collection
However, the success of the system will depend on:
- Platform reliability
- Internet accessibility
- Ease of use for landlords across different regions
Key Concern: Tax on Gross Income
One of the most debated aspects of the MRI regime remains the taxation of gross income without deductions.
Landlords with high operating costs may face pressure, since expenses such as:
- Loan repayments
- Property maintenance
- Service charges
are not considered when calculating tax liability.
This has sparked ongoing discussions within the real estate sector about fairness and long-term sustainability.
What Happens Next
The draft regulations are undergoing public consultation, giving stakeholders an opportunity to submit feedback before final implementation.
Once adopted, the rules could:
- Formalize Kenya’s rental market
- Increase tax compliance among landlords
- Accelerate the digitization of property income reporting
Bottom Line
Kenya is moving toward a more structured and technology-driven rental tax system.
For landlords, the message is clear:
Registration, accurate reporting, and timely tax payment are becoming mandatory — not optional.
