Withholding Tax on Rental Income in Kenya

What is Withholding Tax on Rental Income?

Withholding Tax on Rental Income in Kenya is governed under Section 35(3)(j) of the Income Tax Act and became effective on 1st January 2017. This tax ensures timely collection of taxes from landlords by assigning rent payers (agents) the duty of tax deduction and remittance.

Who Appoints Rent Withholding Agents?

The Kenya Revenue Authority (KRA) appoints Rent Withholding Tax Agents via the iTax platform. Appointed agents receive both a manual letter and an iTax-generated notification. KRA typically prioritizes:

• Private institutions with a strong compliance record
• Public institutions
• However, any person duly appointed by the Commissioner is obligated to withhold tax on rental payments

Applicability of Withholding Tax on Rental Income

This tax applies to gross rental payments for both:

• Residential property
• Commercial property

The appointed agent must withhold 10% of gross rent paid to resident landlords, excluding VAT, and remit it to KRA by the 20th of the following month.

Resident vs Non-Resident Landlords

• For Resident Landlords:
  • The 10% withholding tax is not a final tax
  • A Withholding Certificate is issued and must be used to claim tax credit during annual or monthly rental income tax filing
• For Non-Resident Landlords:
  • A 30% withholding tax is deducted from gross rent
  • This is a final tax—no further taxation applies
  • Any tenant paying rent to a non-resident automatically acts as a withholding agent under Section 35(1)(c)

How to Make Withholding Tax Payments on iTax

To remit withholding tax on rental income, follow these steps:

1. Log in to https://itax.kra.go.ke
2. Click on the “Payment” menu
3. Select “Payment Registration”
4. Choose:
   • Tax Head: Income Tax
   • Tax Sub Head: Income Tax – Rent Withholding
5. Enter:
   • Landlord’s details
   • Property details
   • Gross rent amount
6. Submit to generate a payment slip
7. Make payment via:
   • Bank, or
   • M-Pesa using Paybill 572572
     • Account Number: The Payment Registration Number on the e-slip

Final Thoughts

Withholding tax on rental income ensures efficient tax collection and boosts compliance across the real estate sector. Whether you’re a tenant, institution, or property manager, understanding your role in remitting rent withholding tax is crucial. Timely payment and correct declarations also protect landlords from penalties and enhance transparency.