KENYA Law and Practice Contributed by: Anne Kinyanjui and Bonface Abuya, DLA Piper Africa, Kenya (IKM Advocates)
Rental Income Tax Rental income tax is paid by residents earning annual rental income of between KES288,000 and KES15 million. The tax is charged monthly at a rate of 7.5% of gross rent received per month. No expenses or capital deductions are allowed to be deducted while calculating the tax. This tax is not applicable to non-residents. Rental income earned by a non-resident is subject to WHT at a rate of 30% of the gross rental income received. 8.5 Tax Benefits There are no specific tax benefits from owning land. However, the following expenditures are allowable deductions when determining a person’s taxable income: • capital expenditure incurred on legal costs and stamp duty in connection with the acquisition of a lease for a period not exceeding 99 years of prem - ises to be used for business purposes; • capital expenditure by the owner or occupier of farmland for the prevention of soil erosion;
• sums expended during a year of income for struc - tural alterations to the premises where the expendi - ture is necessary to maintain the existing rent (this does not include the extension or replacement of the premises); and • capital expenditure incurred by the owner or tenant of agricultural land in clearing that land, or in plant - ing permanent or semi-permanent crops thereon. REITs also enjoy the following tax exemptions. • REITs and their investee companies that have been registered by the Commissioner of Domestic Taxes are exempted from income tax, pursuant to Sections 20 (1) (c) and (d) of the Income Tax Act, except for the payment of WHT on interest income and dividends as a resident person. This exemp - tion does not extend to the unit holders and share- holders of REITs and investee companies. • The transfer of assets into REITs and related transactions are exempted from VAT, pursuant to paragraph 33 of Part II of the First Schedule to the VAT Act.
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