RESIDENTIAL RENTAL INCOME
The following key pointers are important for you to ensure you comply with the MRI regulations from the onset and avoid the penalties and interest that come with non-compliance.
1. MRI is a tax payable by resident persons on residential rental income received.
It is payable by property owners whose residential rental income is Kshs. 12,000 per month (Kshs 144,000 per year) to Kshs. 10 million per annum.
2. The rate of tax is 10% on the gross rent income received. No expenses are allowed for deduction.
3. MRI returns are filed monthly through the iTax portal, on or before the 20th of the following month.
For example, Rent received in January is declared and tax paid on or before 20th February.
4. Where there is no rent income received in a given month, you are required to file a NIL return for that month.
5. MRI is a final tax and therefore rental income declared under MRI shall not be declared under the annual return.
6. Late filing of MRI returns attracts a penalty of:
a. Kshs. 2,000 or 5% of the tax due whichever is higher for individuals.
b. Kshs. 20,000 or 5% of the tax due whichever is higher for corporates
7. Late payment penalty is 5% of the tax due while late payment interest is 1% per month.
FRINGE BENEFIT TAX
For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 7%. This rate shall be applicable for the three months of January, February and March 2020.
DEEMED INTEREST RATE
For purposes of section 16(5), the prescribed rate of interest is 7%. This is applicable for the months of January, February and March 2020.
Withholding tax rate of 15% on the deemed interest shall be deducted and paid to the Commissioner by 20th of the month following the month of computation.
For the purposes of section 5(2A) of the Income Tax Act, the prescribed interest rate for the period of six months covering January-June 2020 shall be 7%.