Landlords earning between Ksh288,000 and Ksh15 million annually must pay a monthly residential rental income tax at a rate of 7.5% on gross rent. The amendments aim to improve tax compliance and seal loopholes in rental income declaration.

Under the new regulations, landlords will be required to register their properties on the Electronic Rental Income Tax System (eRITS). They must file monthly returns and remit taxes by the 20th day of the month following receipt of rent.

KRA proposes penalties for late filing and payment ranging from Ksh2,000 to over Ksh50,000. This is part of a broader effort to enhance accountability among property owners.

The Monthly Rental Income (MRI) tax was first introduced under the Finance Act of 2015. It became effective on January 1, 2016, but these new regulations mark a significant shift in enforcement.

KRA stated, “Your voice matters! We want to hear from you before finalising the new Residential Rental Income Tax Regulations and the Graduate Apprenticeship Tax Rebate rules.” This indicates that public input is being sought before final implementation.

In addition, landlords must ensure they register their properties electronically. A person with income subject to residential rental income tax shall register such property in an electronic system prescribed by the Commissioner.

Observers expect these changes will lead to greater transparency in the rental market. However, uncertainties remain regarding how effectively KRA will enforce these regulations.

KRA is seeking public input on the proposed tax regulations until May 25, 2026. This period will be crucial for stakeholders to voice their opinions and concerns about the upcoming changes.

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Validated export values will be automatically prefilled in VAT returns once relevant export documents are approved by Customs. Exporters must capture their Personal Identification Number (PIN) and a valid TIMS or eTIMS zero-rated invoice number when lodging export documents in iCMS. Only export values validated in iCMS and linked to the exporter’s PIN and invoice will be allowed in the VAT return.

The integration is expected to tighten oversight of VAT refund claims by linking customs and tax data. Previously, exporters had to declare export sales in VAT returns separately from customs filings, leading to discrepancies. Errors or omissions at the customs declaration stage will directly affect VAT outcomes under the new system.

KRA has advised taxpayers to ensure their documentation complies with the new requirements ahead of the May 2026 implementation date. The change applies to exports to the Single Customs Territory, other foreign countries, Export Processing Zones (EPZs), and Special Economic Zones (SEZs).

Key facts:

• The integration aims to improve accuracy, reduce manual errors, and enhance compliance in VAT reporting.
• The system will also apply to exports of taxable services based on TIMS/eTIMS invoices for the relevant tax period.
• This change aims to streamline tax reporting and ensure only verified export transactions are reflected in VAT filings.

KRA stated, “Only export values validated in ICMS and linked to the exporter’s PIN and invoice will be allowed in the VAT return.” This statement underscores the importance of accurate documentation for exporters moving forward.

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Nyawanda’s approach focuses on efficiency, transparency, and technology-driven service delivery. She stated, “We focused on efficiency, transparency and technology-driven service delivery.” The authority is also directing attention to informal enterprises to expand the tax base.

In addition to domestic challenges, KRA is enhancing customs cooperation through international agreements. A Memorandum of Understanding (MoU) was signed between the Central Board of Indirect Taxes and Customs (CBIC) and KRA. This agreement aims to facilitate smoother bilateral trade between India and Kenya.

The recent 10th meeting of the India-Kenya Joint Trade Committee took place in Nairobi. It was co-chaired by Rajesh Agrawal and Regina Akoth Ombam. The MoU will enable faster clearances and improve risk management for customs operations.

Nyawanda’s tenure follows the exit of Humphrey Wattanga. Her leadership comes with long-term implications for KRA’s revenue growth strategy. Yet, officials have not confirmed how these changes will impact overall tax compliance.

As Nyawanda navigates these challenges, her leadership will be pivotal in shaping Kenya’s tax landscape and international trade relations.

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On April 24, 2026, KRA began sending messages to flagged traders urging them to regularize their tax statuses. Traders with an annual turnover exceeding Sh5 million must issue eTIMS invoices. Over 500,000 businesses were onboarded to eTIMS by December 2025. KRA aims to onboard 1.2 million businesses by the end of 2026.

KRA estimates it loses approximately KES 300 billion annually due to informal sector non-compliance. “It is very easy to see the transactions. If you are a trader, there is what you purchase and there is what you sell,” said Lilian Nyawanda of the KRA.

Many businesses in Eastleigh face challenges obtaining eTIMS invoices, according to George Obell from the Eastleigh Business District Association. He noted that many traders source goods from the area but struggle with compliance issues.

KRA has issued a final notice for businesses to settle outstanding dues by April 30, 2026. Failure to comply may result in penalties up to KES 20,000 for non-compliance.

The digitalization of the Kenyan economy means that every digital footprint is now visible to the taxman. “A transaction is not completed by one party. It has two parties,” Nyawanda added, emphasizing the importance of transparency in financial dealings.

As KRA continues its enforcement efforts, the impact on MSMEs remains significant. Yet, the effectiveness of these measures will depend on how swiftly traders adapt to new compliance requirements.

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On April 20, 2026, the Kenya Revenue Authority (KRA) announced a significant change. It has scrapped mandatory Nil Returns for non-earners. The KRA introduced a new classification known as ‘PIN with No Obligation’ (PWO).

Under the PWO category, individuals will no longer be required to file returns annually. They will not incur penalties for non-filing as long as they remain without taxable income. This shift aims to alleviate the pressure on individuals who do not earn an income.

The reform allows individuals to register for a PIN without immediate tax obligations. This change enhances the integrity of the taxpayer register, according to KRA officials.

Individuals who begin earning income will be shifted to the regular taxpayer category. This ensures that only those who have taxable income are held accountable for filing returns.

The iTax platform has been enhanced to support the new classification. The authority believes this approach will reduce unnecessary penalties and make tax compliance more realistic and fair.

KRA stated, “iTax has been enhanced to enable individual taxpayers to generate a PIN with No Obligation.” The initiative targets individuals not engaged in taxable activities.

This reform reflects KRA’s effort to modernize tax administration in Kenya. It represents a significant departure from previous policies that imposed obligations on those without any earnings.

Details remain unconfirmed regarding the implementation timeline for the new system, but it is expected to take effect soon. The move is anticipated to positively impact many Kenyans.

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Under the PWO system, holders of a PWO PIN will not need to file any tax returns. This category is available to both Kenyan residents and non-Kenyan non-residents. Applicants must possess a National Identity Card or Diplomatic ID to register for a PWO PIN.

Registration can be completed through the iTax portal. Many individuals found the annual Nil Returns process burdensome. The KRA aims to simplify compliance for taxpayers who do not earn income.

If a holder of a PWO PIN begins earning taxable income, they must update their PIN status. Failure to do so may attract penalties. The late-filing penalty is set at the higher of 5% of the tax due or Sh2,000.

KRA is finalizing the migration process for existing PIN holders to transition to this new PWO category. This reform follows earlier temporary suspensions of Nil filing earlier in 2026.

KRA officials stated, “This is an initiative aimed at enhancing the integrity of the taxpayer register to facilitate a certain category of taxpayers who may not be engaged in gainful and taxable activities but still require a PIN.”

Yet, it remains crucial for PWO holders to understand their obligations. As one KRA guide noted, “The moment you start earning income, whether through a job, a business, or freelance work, you are expected to update your PIN status and resume normal filing obligations.”

This reform marks an important shift in how Kenya manages its tax system. It reflects an effort to streamline processes and reduce unnecessary burdens on taxpayers.

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The Kenya Revenue Authority (KRA) has announced a substantial increase in tax revenue, collecting Sh2.04 trillion in the nine months leading up to March 31, 2026. This figure represents an 11.4 percent rise compared to the Sh1.829 trillion collected during the same period in the previous financial year.

Domestic taxes accounted for Sh1.3 trillion of the total revenue, reflecting a year-on-year growth of 10.4 percent. Additionally, customs and border control collections rose to Sh733.7 billion, marking a 13.3 percent increase from Sh647.6 billion in the previous year.

Furthermore, KRA collected Sh204.45 billion on behalf of other government entities, exceeding the target of Sh201.7 billion. Revenue collected on behalf of the National Treasury reached Sh1.834 trillion, achieving 95.5 percent of the target set at Sh1.921 trillion.

Despite these gains, KRA fell short of its collection target of Ksh 2.12 trillion for the period, realizing a performance rate of 96.1 percent. The authority has been assigned a more ambitious target of Ksh 2.97 trillion for the entire 2025/26 financial year.

To meet this target, KRA faces a significant gap of approximately KSh 932 billion that needs to be raised in the final quarter. The growth in revenue has been attributed to improved compliance and the implementation of digital reforms.

Humphrey Wattanga, a KRA spokesperson, noted, “Revenue collection maintained steady quarter-on-quarter growth across all three quarters, indicating improving compliance consistency and gradual strengthening in economic activity.” He further emphasized that this resilience demonstrates continued taxpayer responsiveness and expanding compliance.

Economic indicators also reflect a positive trend, with economic growth improving to 4.9% in the third quarter of 2025, while inflation stood at 4.4% in March 2026. These factors may contribute to the ongoing efforts by KRA to enhance revenue collection.

As KRA continues to adapt to changing economic conditions, further developments in revenue collection strategies are anticipated. Details remain unconfirmed regarding the specific measures that will be implemented to bridge the existing revenue gap.

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On March 25, 2026, the Kenya Revenue Authority (KRA) announced a significant escalation in its efforts to scrutinize nil returns filed by taxpayers. This move comes as part of a broader strategy to enhance tax compliance and seal revenue leakages within the country. The KRA’s focus is particularly directed towards mobile money transactions, which have become increasingly prevalent in Kenya’s financial landscape.

In recent years, the KRA had initially closed the nil payment option to validate and realign its systems. As part of the new measures, KRA officials, including Maurice Oray, have emphasized that while taxpayers are not prohibited from filing nil returns, the authority will actively flag any transactions made, especially those conducted via mobile money platforms. Oray stated, “As you file nil returns, KRA has information and details about your financial activities,” highlighting the agency’s capability to track financial behaviors.

In conjunction with these measures, the KRA plans to introduce pre-filled tax returns that will automatically capture known income streams, thereby simplifying the filing process for compliant taxpayers. This initiative aims to ensure that all income streams are tracked more comprehensively, aligning with the KRA’s wider reforms aimed at improving tax collection efficiency.

The government, under the leadership of Treasury Cabinet Secretary John Mbadi, has ruled out the introduction of new taxes in the upcoming Finance Bill for the 2026/2027 financial year. Instead, Mbadi has indicated that the focus will be on enhancing the efficiency of tax collection. He remarked, “We will not be increasing revenue in the coming Finance Bill,” suggesting a shift towards better management of existing tax structures rather than imposing additional burdens on taxpayers.

As part of its strategy, the KRA is placing increased pressure on itself to enhance compliance rates and address areas where revenue has been under-collected. Rental income has been identified as a significant area of concern, where the KRA has historically struggled to capture adequate tax revenue. This renewed focus on rental income, along with the reliance on financial data, including mobile money records, is expected to improve the agency’s oversight capabilities.

The KRA’s intensified scrutiny of nil returns and mobile money transactions is a response to the growing need for transparency and accountability in tax reporting. The agency’s reliance on financial data marks a shift in its approach to tax compliance, moving towards a more data-driven methodology to verify taxpayer income.

As the KRA implements these changes, taxpayers are advised to be aware of the implications of their financial activities, particularly those involving mobile money. The agency’s commitment to tracking income streams more effectively underscores the importance of accurate reporting and compliance with tax obligations.

Overall, the KRA’s crackdown on nil returns represents a significant development in Kenya’s tax landscape, with potential implications for taxpayers across various sectors. The ongoing reforms and increased scrutiny are expected to shape the future of tax compliance in the country, as the KRA seeks to enhance its revenue collection efforts and ensure that all taxpayers contribute their fair share.

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What does the future hold for value added tax (VAT) in Kenya? Recent proposals from the Kenya Revenue Authority (KRA) suggest significant changes that could impact businesses across the country. The KRA aims to eliminate the current VAT registration threshold of KSh 5 million in annual turnover, a move that could require all businesses to remit VAT at the standard rate and issue compliant tax invoices.

Kenya’s VAT collections have posted steady growth over the past four financial years, rising from Sh244.93 billion in 2021/22 to an estimated Sh327.66 billion in 2024/25 for locally generated taxes. VAT on imports has also seen an increase, climbing from Sh278.17 billion to Sh333.07 billion over the same period. Currently, VAT is the second-largest revenue source for the government, contributing Sh660.7 billion to the exchequer.

The KRA estimates that the current VAT system captures only a fraction of potential taxpayers, with about 230,000 registered VAT entities. The removal of the registration threshold could potentially increase VAT collections from roughly KSh 653 billion to over KSh 1 trillion. However, this proposal has raised concerns among stakeholders, particularly regarding its impact on micro-enterprises.

Approximately 83 percent of Kenya’s total employment is accounted for by the informal sector, which often lacks the administrative capacity to comply with such tax regulations. Critics argue that the proposal may impose a heavy operational burden on micro-enterprises, which could struggle to meet the new requirements. Jane Wanjiru, a small business owner, expressed her concerns, stating, “The proposal feels like an existential threat.”

Moreover, the cost of hiring accounting staff or investing in compliant software often exceeds the actual tax revenue the KRA would collect from a micro-enterprise. This raises questions about the feasibility of compliance for smaller businesses. Research from the OECD warns against lowering registration thresholds, citing potential inefficiencies in monitoring small taxpayers.

There are fears that the KRA’s proposal could push informal businesses further into the shadows, with many opting for cash transactions to avoid compliance altogether. This could undermine the very goal of increasing tax revenues and formalizing the economy. As one expert noted, “If the KRA intends to widen the net, it must provide the infrastructure, training, and streamlined digital tools that make compliance feasible for the smallest trader.”

Kenya’s VAT collections have shown growth due to increased economic activity and improved tax compliance, but the proposed changes could alter the landscape significantly. As discussions continue, the implications of these proposals remain to be seen, and details remain unconfirmed.

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