Withholding tax on rent is tax taken from the rent before the landlord receives it. It works in a similar way to other withholding taxes: the payer keeps part of the payment, sends it to KRA and the landlord claims the amount as a credit against their own tax.
Who must withhold
- Managing agents appointed by KRA withhold on residential rent they collect for landlords. The rate is 7.5% of the gross rent, and it counts toward the landlord's monthly rental income tax.
- Tenants that are businesses, as withholding agents, withhold on commercial rent they pay. The rate for a resident landlord is 7.5% of the gross rent, and 30% for a non-resident landlord.
- An individual tenant paying a landlord directly for a home normally does not withhold.
If you are unsure whether you must withhold, ask KRA or your accountant before the first payment.
A worked example
A company rents offices for KES 200,000 a month from a resident landlord. At 7.5%, the company withholds KES 15,000 and pays the landlord KES 185,000. The company pays the KES 15,000 to KRA by the 20th of the following month and issues the landlord a certificate. The withholding tax on rent calculator shows the split for any rent and says when to pay.
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How tenants and agents pay
- Deduct the tax when you pay the rent.
- File the withholding tax return on iTax for the month and pay by the 20th.
- Give the landlord a withholding certificate showing the gross rent, the tax and the period.
- Keep copies with your records. The withholding tax certificate register records each payment, works out the tax and shows which certificates have been issued.
How landlords claim the credit
The tax withheld appears in the landlord's iTax account if the payer files and pays. Ask for the certificate and claim the credit in your monthly rental income return or your annual return; see how to file a monthly rental income return. If a credit is missing, ask the payer to file, and keep your bank statements showing the net rent.
Withholding and the rental income tax
For residential landlords, the 7.5% withheld by an appointed agent is the same as the tax due, so no further monthly rental income tax is due on that rent. Landlords paying MRI themselves pay on rent that was not subject to withholding. The tax and the rate for each case are shown in monthly rental income tax or annual tax.
Common mistakes
- Paying the landlord in full and forgetting to withhold, which makes the tenant liable.
- Withholding at the wrong rate for a residential or commercial lease.
- Paying the tax late; see KRA penalties and interest.
- Landlords not claiming the credit.
For landlords with agents
Ask for a monthly statement from your agent showing the rent collected, their fee and the tax withheld, and check it against your bank. Record each statement in the rental property and tenant register and the rent receipt book.
Other withholding
The same mechanism applies to professional fees and contracts; see withholding tax in Kenya explained.
Rates and who must withhold are set by law and notices from KRA. Confirm the current position with KRA.
Common questions
What if the tenant forgets to withhold tax from my rent? The tenant who should have withheld can be asked by KRA to pay the tax, with penalties and interest, even though you received the full rent. Landlords should agree in the lease who withholds, ask for a withholding certificate every month and keep it for the annual return.
Does an individual tenant have to withhold? Generally no. The duty falls on appointed withholding agents and on the categories the law lists, such as companies, partnerships and government bodies, and on managing agents who collect rent. A person paying their own rent from personal funds is normally not an agent.
How does the landlord claim the tax that was withheld? The tax withheld is a credit. Record each certificate, add the totals for the year and enter them on the annual return so the credit is set against your tax. Where your tax is lower than the credit, the difference can be refunded or carried against other tax.