Appointment of Rental Income Tax Agents in Kenya



Appointment of Rental Income Tax Agents in Kenya

The Finance Act, 2023 introduced Section 42C to the Tax Procedures Act, granting the Commissioner of the Kenya Revenue Authority (KRA) the authority to appoint rental income tax agents. These agents are responsible for collecting and remitting rental income tax on behalf of taxpayers to the Commissioner.

Appointment Process

  • The Commissioner appoints rental income tax agents in writing and notifies them of the requirement to withhold tax on rental payments.
  • Notices of appointment can be sent through electronic means.
  • The target agents are typically large tenants and property management companies.

Obligations of Appointed Agents

  • Withhold tax at a flat rate of 7.5% on the gross rent paid to resident landlords.
  • Remit the withheld tax to KRA by the 20th day of the month following the rent payment.
  • Provide the landlord with a certificate stating the amount of rent and tax deducted.

Penalties for Non-Compliance

  • Failure by an appointed agent to deduct and remit withholding tax will result in a penalty of 10% of the tax due and interest at the rate of 1% per month until the tax is paid.
  • The interest is capped at the value of the principal tax, while the withholding tax penalty is limited to KES 1 million.

Note: It's important to note that agents cannot decline an appointment by the Commissioner. Withholding tax without being appointed is considered illegal under the Tax Procedures Act.

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