Resident employees are taxed on worldwide earned income, in respect of any employment or services rendered in Kenya or outside Kenya. Residents are also taxed on any other income that has accrued in or is derived from Kenya.
Non-resident employees are taxable only on their income earned from within Kenya or derived from Kenya.
Personal income tax rates
Effective 1 July 2023, the tax rates applicable to taxable income are tabulated as follows:
|Annual taxable income (KES*)||Tax rate (%)|
|On the first 288,000||10|
|On the next 100,000||25|
|On the next 5,612,000||30|
|On the next 3,600,000||32.5|
|On all income over 9,600,000||35|
* Kenyan shillings
As shown above, the maximum rate of 35% will be charged on income in excess of KES 9,600,000.
Resident individuals are entitled to a personal relief of KES 2,400 per month. (see Personal relief in the Other tax credits and incentives section).
Residential rental income tax
Residential income tax is payable by any resident person who accrues or derives income from the use or occupation of residential property in Kenya.
Effective 1 January 2016, a simplified tax on residential rental income for landlords was introduced. The Finance Act, 2020 increased the threshold for the annual gross rental income from KES 10 million or less to KES 15 million or less. The landlords falling under this category are required to pay residential rental income tax at a flat rate of 10% on the gross rental income such that no tax-deductible expenses are allowed. The Finance Act 2023 reduced the rental income tax rate to 7.5% effective 1 January 2024.
Eligible persons are required to file monthly tax returns via the i-Tax system and pay the tax due on or before the 20th day of the month following the rent receipt. In the context of this tax, a month means a calendar month.
Landlords who wish to continue being taxed under the old tax regime can elect in writing to the Commissioner to be taxed under the normal tax rates. Once approved by the Commissioner, such landlords shall be required to pay instalment taxes and file returns in the normal way.
The Finance Act, 2023 introduces section 42C of the Tax Procedures Act (TPA) which grants the Commissioner the authority to appoint rental income tax agents. These agents will be responsible for collecting and remitting rental income tax on behalf of taxpayers to the Commissioner.