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Legal & Regulatory

How to Pay Rental Income Tax in Kenya Using Paybill 222222: A Step-by-Step Guide

  • BY waceke
  • October 10, 2024
black man using laptop

The Kenyan government has streamlined the process for paying rental income tax, making it easier and more transparent for landlords to comply with tax regulations. With the introduction of the government Paybill number 222222, landlords can now complete their tax payments conveniently using mobile money services like M-Pesa.

The government has also revised the rental income tax rate from 10% to 7.5% on gross rent received, offering relief to landlords while enhancing tax compliance. In this guide, we will walk you through the process of registering for Monthly Rental Income (MRI), filing returns, and making payments through Paybill 222222.

What is Monthly Rental Income (MRI)?

MRI is a tax payable by property owners on the rental income they receive. It applies to landlords who earn between Ksh 280,000 and Ksh 15 million annually in rental income. Landlords must register their property for MRI through the Kenya Revenue Authority (KRA) iTax portal before they can submit their returns and pay their rental income tax.

How to Register a Property for MRI

Before filing your rental income tax, you need to register your property. Here’s how:

  1. Go to the iTax Portal: Visit www.itax.kra.go.ke.
  2. Register Property Details: Under the Registration tab, select Register Property details and click “Next.”
  3. Select Property Type: Fill in the details depending on the type of property (new property, update, or deregister).
  4. Enter Tenant’s PIN: Add the tenant’s PIN, and the system will auto-populate your name and property details.
  5. Complete Property Information: Fill in the required fields, such as estimated monthly rent, and submit.
  6. Receive Acknowledgment Receipt: Once the property is registered, you’ll get an acknowledgment receipt.

How to File Rental Income Tax Returns

After registering your property, you will need to file your MRI tax returns monthly. Follow these steps:

  1. Login to iTax: Visit www.itax.kra.go.ke and log in to your account.
  2. File Return: Under the Returns tab, click on File Return, select Income Tax – Rental Income, and click “Next.”
  3. Filing Type: Select whether you’re filing an original return or an amended return.
  4. Enter Monthly Income: The number of properties and your rental income will be auto-populated. If not, input your monthly rental income.
  5. Tax Computation: The system will automatically calculate your tax based on the 7.5% rate. If you have any withholding certificates or tax credits, they will be considered.
  6. Submit: Once all details are filled, submit your return.

How to Pay Rental Income Tax via Paybill 222222

Once you’ve filed your returns, the next step is to pay your rental income tax. Follow these steps to generate a payment slip and pay using the government’s Paybill number 222222:

Step 1: Generate a Payment Slip

  1. Go to iTax: Log in to iTax.
  2. New Payment Registration: Under the Payments tab, select New Payment Registration.
  3. Select Tax Head: Choose Income Tax and Income Tax – Rent.
  4. Payment Type: Choose Self-Assessment Tax and specify the tax period (year and month).
  5. Submit and Retrieve Payment Registration Number (PRN): Click submit, and you will receive a unique PRN.

Step 2: Make Payment Using M-Pesa

Once you have the PRN, you can complete your payment using M-Pesa:

  1. Go to M-Pesa: Open the M-Pesa app or use the SIM toolkit.
  2. Paybill Number: Enter Paybill 222222 as the business number.
  3. PRN: Use your unique PRN as the account number.
  4. Amount: Enter the tax amount as indicated on the payment slip.
  5. PIN and Send: Enter your M-Pesa PIN and send. You will receive a confirmation message upon completion.

Alternative Method: Dial *222#

If you prefer, you can also make your payment by dialing *222# on your mobile phone:

  1. Dial *222#: Open your phone’s dialer and enter *222#.
  2. Select Pay KRA Bill: From the menu, choose the Pay KRA Bill option.
  3. Enter PRN: Enter your E-slip (PRN) number.
  4. Payment Mode: Select M-Pesa as the payment method.
  5. Complete Payment: Enter your M-Pesa PIN and follow the prompts to complete the payment.

Filing Deadlines and Penalties

Landlords are required to file rental income tax returns by the 20th of the following month. For example, if you receive rent in October, you must file your returns by November 20th. If no rent was received during a specific month, you must file a NIL return for that period.

Benefits of Using Paybill 222222

The use of Paybill 222222 for rental income tax payments offers several advantages:

  • Convenience: You can pay your taxes from the comfort of your home or office via mobile money.
  • Transparency: The system ensures accurate tax payments and reduces the chances of corruption.
  • Efficiency: Streamlined tax payments through iTax and Paybill make the process faster and easier for landlords.

Final Tax

Once you file your MRI return, it is treated as a final tax. Therefore, landlords are not required to declare rental income in their annual income tax returns.

In summary, Kenya’s government has made paying rental income tax easier by introducing Paybill 222222 and simplifying the filing process. Landlords can now register, file, and pay their taxes more efficiently through the iTax platform and mobile money services like M-Pesa.