KRA pushes mandatory eRITS registration to bridge Sh66 billion rental tax gap

The Kenya Revenue Authority is moving to enforce mandatory registration for all landlords on the Electronic Rental Income Tax System as it seeks to shore up collections from the real estate sector. The tax collector aims to raise annual rental income tax revenue to Sh80 billion, a significant jump from the current Sh14 billion baseline.

Under the proposed Draft Income Tax (Residential Rental Income Tax) Regulations 2026, every person with income chargeable to residential rental income tax will be required to register their property in the electronic system prescribed by the Commissioner. This shift from voluntary to compulsory onboarding follows a period of low uptake since the system was introduced.

Recent data indicate that the Electronic Rental Income Tax System has struggled to gain traction despite its role in simplifying tax obligations. Only 1,412 landlords had signed up by late April, accounting for just over 26,000 rental units. This level of participation has resulted in a mere Sh1.68 million in tax collected through the platform so far.

President Ruto has previously highlighted the potential of the system to expand the tax base by identifying previously unregistered property owners. The government expects the automation of these processes to provide better visibility into rental transactions and reduce the loopholes that currently allow Sh66 billion in potential revenue to go uncollected.

The regulations require landlords to provide specific property details, including tenant information and estimated monthly income. For those within the residential rental income tax bracket, the current rate stands at 7.5% of the gross rent received. This tax is considered final and does not allow for the deduction of expenses or losses.

Public consultation on the draft regulations is expected to continue through May 2026. If the mandatory requirement is gazetted, landlords will be obligated to file their returns through the portal by the 20th of every month. Failure to comply with these digital filing requirements may attract penalties under the Tax Procedures Act.

The integration of the platform with other government databases, such as the land registry, is intended to create a more transparent environment for property-related taxes. By making the digital platform the only avenue for declaration, the Authority hopes to transition the sector into a fully compliant contributor to the national budget.