The Finance Bill 2026 is proposing significant changes to the taxation of non-resident landlords, a move aimed at strengthening tax compliance, reducing revenue leakages and creating a more equitable tax system within Kenya’s rapidly growing real estate sector.
The proposal comes at a time when the property market continues to record strong growth, driven by urbanisation, rising demand for housing and increased investment in residential and commercial developments across the country.
Real Estate Sector Continues to Drive Economic Growth
According to the Kenya National Bureau of Statistics (KNBS) Real Estate Survey 2023/2024, the sector registered a growth rate of 33.7 per cent, cementing its position as one of Kenya’s most dynamic economic sectors.
The industry’s expansion has been fueled by population growth, infrastructure development and a growing middle class seeking both home ownership and investment opportunities.
Despite this growth, experts argue that the sector’s contribution to tax revenues remains below its full potential.
Tax Collections Remain Below Potential
Data from the Kenya Revenue Authority (KRA) shows that Monthly Rental Income (MRI) tax collections have been increasing steadily over recent years.
Collections rose from KSh12.3 billion in the 2021/2022 financial year to KSh13.6 billion in 2022/2023 before reaching KSh14.4 billion in 2023/2024.
However, estimates suggest the sector could generate more than KSh100 billion annually in tax revenue, indicating a substantial compliance gap.
Analysts attribute the shortfall to challenges in identifying landlords, tracking rental income and ensuring effective compliance, particularly among non-resident property owners.
Finance Bill Targets Non-Resident Landlord Compliance
One of the key proposals contained in the Finance Bill 2026 seeks to strengthen the taxation framework for non-resident landlords.
Currently, many non-resident property owners are taxed primarily through a withholding tax mechanism, where tenants or property agents deduct and remit taxes on rental income.
The proposed reforms would require non-resident landlords to register for tax, file returns and directly account for their rental income earned in Kenya.
Supporters of the proposal argue that the changes do not introduce a new tax but instead enhance compliance and align taxation requirements for both resident and non-resident landlords.
Digital Reforms to Support Tax Administration
The proposed measures complement ongoing efforts by KRA to modernise tax administration through technology.
Among the initiatives already introduced is the Electronic Rental Income Tax System (eRITS), a digital platform designed to simplify compliance, improve transparency and make it easier for landlords to meet their tax obligations.
Tax experts believe combining digital systems with stronger compliance requirements could significantly improve revenue collection while reducing opportunities for tax avoidance.
Move Expected to Promote Tax Fairness
Proponents say the reforms are ultimately about ensuring fairness within the tax system.
By bringing non-resident landlords into a more structured compliance framework, the government aims to create a level playing field where all property owners contribute their fair share toward national development.
If approved, the proposal could strengthen domestic revenue mobilisation, improve accountability within the property sector and support the government’s broader efforts to build a more transparent and equitable tax regime.
