If you own rental property in Kenya, you have probably seen a post claiming that rental income tax has gone up to 10%. It has not. The Finance Act 2026, signed on 23 June 2026, left the tax on resident landlords exactly where it was. What it did change is how non resident owners are taxed. A new levy on short stay bookings is also still waiting in the wings. Here is where things actually stand.
Resident landlords: still 7.5% of gross rent
Monthly Rental Income tax (MRI) is a simple, final tax on residential rent for Kenyan tax residents, individuals and companies alike. KRA's own guidance still sets the rate at 7.5%.
| Item | The rule |
|---|---|
| Rate | 7.5% of gross rent received |
| Who it covers | Resident landlords earning more than KES 288,000 and not more than KES 15 million in residential rent a year |
| Expenses | None deductible: no repairs, agent fees, loan interest or depreciation |
| Due date | The 20th of the month after the rent is received, filed and paid on iTax |
| Above KES 15 million | Normal income tax rules apply, expenses are allowed and the return is annual |
Several online guides published a 10% rate, some citing proposals made before the Finance Bill was passed. The Act as enacted does not contain that change. Before acting on any tax figure you read online, check it against KRA's guidance or the Act itself.
Commercial property is different
MRI covers residential rent only. Rent from shops, offices, warehouses and other commercial space is taxed under normal income tax: you declare it in your annual return and deduct genuine expenses. Where your tenant is a withholding agent appointed by KRA, it deducts 7.5% at source and a certificate lands in your iTax profile. That certificate is a credit against your final tax, not an extra tax, so match it to your rent roll every quarter. Our withholding tax guide sets out how the credits work.
Two practical points. If a building has both flats and shops, split the rent roll so each unit is taxed under the right regime. And commercial landlords need to issue eTIMS invoices, because a tenant without one cannot deduct the rent it pays you.
Non resident owners: a new 30% regime from 1 July 2026
The real rental change in the Act concerns owners who are not Kenyan tax residents, including many diaspora landlords and foreign directors who hold property here. From 1 July 2026 they must register under a simplified framework and declare and pay tax at 30% of gross rent by the 20th of the month after the rent is paid. It does not apply where the rent has already been taxed through withholding by the tenant.
Residency depends on where you live, not on your passport. In broad terms you are resident if you have a permanent home in Kenya and were here at some point in the year, or if you spent 183 days or more in Kenya in the year. A Kenyan who has moved abroad and still files MRI at 7.5% may be filing under the wrong regime. That is far cheaper to correct now than after KRA raises it.
Airbnb and short stay hosts
Short stay income sits in a grey area that catches many hosts out. Airbnb's own 2026 tax guide for Kenya treats resident hosts within the MRI band as able to file MRI at 7.5% of gross receipts. Hosts outside the band, non residents and anyone who opts out of MRI file under normal income tax instead and can deduct expenses. Three points owners often miss:
- VAT. Short stay accommodation is not treated like an ordinary residential tenancy for VAT. Once your taxable supplies reach KES 5 million in any 12 months you must register and charge 16%. A handful of busy units can cross that line faster than owners expect. See our VAT registration guide.
- Running it like a hotel. Where you employ staff, provide cleaning, meals or concierge services and market the units as a business, the income starts to look like hospitality income rather than passive rent. Take advice before choosing a regime for a large portfolio.
- The 2% tourism levy. In January 2026 the Tourism Fund announced that the 2% levy paid by hotels would be extended to short stay bookings, collected through the platforms, with hosts also registering with the Tourism Regulatory Authority. As of mid September 2026 the regulations had not yet taken effect. Expect it to arrive and do not set your prices as if it never will.
The records that protect you
- A rent roll for every unit: tenant, rent due, rent received, date and arrears.
- Service charge on its own schedule. Keep service charge collections and spending separate from rent so it is always clear what is income and what is a shared cost.
- Platform earnings reports. Airbnb and Booking.com pay out after deducting commission, but tax is worked out on the gross amount. Download the earnings report every month.
- Mpesa and bank reconciled to the rent roll every month, as set out in our records guide.
- Withholding certificates downloaded from iTax and matched to tenants every quarter.
A window worth using: the amnesty to 31 December 2026
If you have missed MRI returns, the Finance Act 2026 offers an amnesty on penalties and interest for periods up to 31 December 2025, provided the principal tax is paid by 31 December 2026. For a landlord with a year or two of unfiled rent, that can remove most of the cost of getting straight. Our full list of KRA penalties shows what the amnesty saves.
Five actions for landlords this quarter
- Confirm your residency status and that you are filing under the right regime.
- Split your rent roll between residential and commercial units.
- Check whether short stay income is bringing you close to the KES 5 million VAT line.
- File any missed MRI returns and pay the principal before 31 December 2026 to use the amnesty.
- Put the 20th of every month in the diary. MRI does not wait for year end; the full compliance calendar has every other date.
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