đź’ˇ Introduction
Kenya’s real estate sector has undergone major tax changes in the last three years — especially with the introduction of eTIMS reporting, updated rental income tax structures, and KRA’s new rental management platform (eRITS).
Today, both landlords and tenants have tax responsibilities that didn’t exist a few years ago. Whether you’re renting out residential property, managing commercial buildings, or renting a house as a tenant, this guide explains everything you need to know in 2025.
1. Types of Rental Income Tax in Kenya (2025)
Kenyan rental income is taxed under two main regimes:
✔️ A. Residential Rental Income Tax (RRIT)
- Applies to landlords earning KSh 1M – KSh 15M per year
- Tax rate (2025): 7.5% of gross rent
- Paid monthly
- No expenses allowed
- Filed via eRITS or iTax
✔️ B. Commercial Rental Income (Normal Income Tax)
Applies if:
- Annual rent exceeds KSh 15M, or
- Landlord opts out of RRIT, or
- Property is used for business (shops, offices, warehouses)
Taxed under standard business rules:
- Income = rent – allowable expenses
- Tax rate = 30% for companies, graduated rates for individuals
- VAT may apply for some commercial properties
- eTIMS invoicing required
2. Introduction of eRITS (2024/2025 Updated Rules)
KRA launched the Electronic Rental Income Tax System (eRITS) to streamline rental tax compliance.
What eRITS does:
- Allows landlords to declare rental properties
- Maps tenants and properties under your PIN
- Sends automated tax assessments
- Tracks monthly payments
- Integrates with iTax for RRIT
- Allows tenants to verify the landlord’s KRA PIN
Who must use eRITS?
✔️ All residential landlords
✔️ Property managers/agents
✔️ Some commercial property owners
✔️ Landlords earning income under RRIT
3. Landlord Obligations in Kenya (2025)
Whether you own one apartment or a block of flats, you must comply with the following:
1. Register Rental Source of Income on iTax
Update your PIN to reflect:
✔️ Rental Income (Residential or Commercial)
2. Declare Property on eRITS
Provide:
- Property location
- Tenant details
- Monthly rent per unit
- Agent details (if any)
Failure to declare may trigger automatic assessments.
3. File and Pay Rental Tax Monthly
For Residential Rental Income:
- File monthly via eRITS/iTax
- Pay by the 20th of every month
- Rate: 7.5% of gross rent
- No deductions allowed
For Commercial Rental Income:
- File and pay income tax annually
- VAT filing monthly (if applicable)
- File rental eTIMS invoices (mandatory for 2025)
4. Issue eTIMS Invoices (2025)
Commercial landlords must issue eTIMS invoices for rent.
Residential landlords may be required depending on the property use — KRA will progressively expand eTIMS coverage.
5. Keep Proper Records
Mandatory documents include:
- Lease agreements
- Receipts and invoices
- Bank/M-PESA rent records
- Repair and maintenance costs
- Withholding tax certificates (if any)
4. Tenant Tax Obligations (Often Overlooked!)
Most tenants don’t know they also have obligations. These include:
✔️ 1. Withholding Tax on Commercial Rent
Tenants renting commercial premises must withhold 10% of rent and remit it to KRA monthly.
This applies to:
- Shops
- Offices
- Go-downs
- Warehouses
- Business stalls
- Co-working spaces
Tenant must:
- Deduct 10%
- Remit to KRA
- Issue landlord a WHT certificate
Landlord then claims this as a credit in their income tax return.
Note: Residential tenants do NOT deduct WHT.
✔️ 2. Keep Proof of Rent Payments
Tenants should keep:
- Bank slips
- M-PESA confirmations
- Rent receipts
- Lease agreements
These are useful during business audits.
✔️ 3. Verify Landlord’s PIN on eRITS
KRA encourages tenants to confirm:
- Landlord PIN
- Property registration
- Tax compliance of landlord
This protects tenants from illegal property agents.
5. Penalties for Landlords (2025)
| Offense | Penalty |
|---|---|
| Failing to declare rental income | Back taxes + interest + penalties |
| Failure to pay RRIT monthly | 5% penalty + 1% interest per month |
| Failure to use eRITS | Estimated assessments |
| Failure to issue eTIMS invoice (commercial) | Up to KSh 1M fine |
| Failure to declare VAT on commercial buildings | VAT backdated assessments |
| Wrong declarations | Audit + penalties under TPA |
6. Penalties for Tenants (2025)
Commercial tenants who fail to withhold WHT face:
- Penalty: 10% of tax not deducted
- Interest: 1% monthly
- Tenant becomes liable for full tax!
7. Common Mistakes Landlords Make
| Mistake | Outcome |
|---|---|
| Filing RRIT yearly instead of monthly | Penalties apply |
| Not declaring vacant months | Auto-assessments |
| Not registering property in eRITS | Compliance issues |
| Not understanding RRIT vs Commercial rules | Wrong tax filing |
| Claiming expenses under RRIT | Disallowed |
| Not issuing eTIMS invoices (commercial) | VAT rejection |
| Letting agent handle everything unchecked | Hidden non-compliance |
8. Frequently Asked Questions (FAQ)
Q1: Do I need to file if my house was vacant?
Yes — file zero rent for that month.
Q2: Can I claim expenses under Residential Rental Tax?
No — RRIT is gross-based.
Q3: Can KRA detect undeclared tenants?
Yes — via eRITS, mobile money, bank data, and estate mapping.
Q4: Do I need eTIMS for residential rent?
Not yet for most cases — but commercial rent must use eTIMS.
Q5: Should tenants withhold tax for residential rent?
No — WHT applies only to commercial property.
Conclusion
Whether you’re a landlord or a tenant, understanding rental tax rules in 2025 is essential.
KRA has digitized rental compliance through eRITS, eTIMS, and bank/M-PESA analytics, meaning undeclared rent is now easily detected.
But with simple monthly filing and proper record-keeping, you can stay compliant and avoid penalties.