KRA & Diaspora: Do I Need to File Tax Returns if I Only Own Land in Kenya?

Tax Compliance

KRA & Diaspora: Do I Need to File Tax Returns if I Only Own Land?

📅 December 2024 ⏱️ 8 min read 🌍 Diaspora Tax Guide

You’re living in London, Dubai, Toronto, or New York. Back home in Kenya, you own a plot of land—maybe it’s in Kitengela, Ruiru, or Kajiado. It’s just sitting there, not generating any rental income, no farming activity, nothing. Then someone mentions KRA tax returns, and suddenly you’re worried: “Do I need to file? I don’t even have income from Kenya!”

This is one of the most common questions among Kenya’s diaspora community, and the confusion is understandable. The Kenya Revenue Authority (KRA) tax system can seem complex, especially when you’re navigating it from thousands of miles away with limited or no Kenya-sourced income.

In this comprehensive guide, we’ll cut through the confusion and give you clear, actionable answers about your tax filing obligations as a diaspora Kenyan with land ownership in Kenya.

⚡ Quick Answer

If your ONLY connection to Kenya is owning non-income-generating land and you’re a non-resident for tax purposes, you generally do NOT need to file an annual tax return. However, there are important exceptions and nuances you must understand.

Understanding Tax Residency: Are You a Resident or Non-Resident?

The first and most critical question is: What is your tax residency status? This determines your entire tax obligation in Kenya.

You’re Considered a Tax Resident in Kenya If:

You spend 183 days or more in Kenya in any calendar year, OR
You have a “permanent home” in Kenya and spend at least some time there each year, OR
You’re employed in Kenya (even if you travel frequently)

You’re a Non-Resident for Tax Purposes If:

You spend less than 183 days in Kenya during the tax year
Your permanent home is abroad
You work and earn income outside Kenya
Your life is primarily centered outside Kenya

📌 Important: Tax Residency vs. Citizenship

Being a Kenyan citizen does NOT automatically make you a tax resident. Tax residency is based on physical presence and economic ties, not passport. You can be a Kenyan citizen living in Canada and be a non-resident for tax purposes.

Tax Status	Filing Requirement	What’s Taxed
Tax Resident	Must file annual returns	Worldwide income (Kenya + abroad)
Non-Resident	Only if you have Kenya-sourced income	Only Kenya-sourced income

When Do You NEED to File KRA Tax Returns?

Let’s break down the specific scenarios where tax filing is required:

📊 Filing Decision Framework

Scenario 1: You’re a Tax Resident

YES, FILE – If you’re a tax resident (183+ days in Kenya), you MUST file an annual tax return even if you have zero Kenya-sourced income. This is mandatory.

Scenario 2: Non-Resident with Rental Income

YES, FILE – If your land generates rental income (someone is paying you to use it), you must file and pay tax on that income at non-resident rates.

Scenario 3: Non-Resident with Business Income

YES, FILE – If you’re using the land for any income-generating activity (farming, parking, events), you must file and declare that income.

Scenario 4: Non-Resident with Employment Income

YES, FILE – If you receive employment income from Kenya (even remotely), you must file returns.

Scenario 5: Non-Resident, Land Only, No Income

NO FILING REQUIRED – If you’re a non-resident and the land generates absolutely no income, you generally don’t need to file annual returns.

Understanding Land Ownership & Tax Obligations

Here’s what many diaspora Kenyans don’t realize: Simply owning land is not a taxable activity in Kenya. Let’s clarify what this means:

What’s NOT Taxed:

✓ Land Ownership: Just owning a plot doesn’t create tax liability

✓ Land Appreciation: Increase in land value isn’t taxed until you sell

✓ Undeveloped Land: Vacant, idle land has no income tax implications

What IS Taxed:

✗ Land Rates: Annual county government charges (this is NOT income tax—it’s a local government levy paid to the county)

✗ Rental Income: If you lease or rent the land to others

✗ Business Income: Any commercial use of the land

✗ Capital Gains: When you eventually sell (5% currently, rising to 15% in 2025)

⚠️ Critical Distinction: Land Rates vs. Income Tax

Many people confuse land rates (county property tax) with KRA income tax filing requirements. These are completely separate:

Land Rates: Paid annually to your county government based on land value. You MUST pay this regardless of residency or income.
Income Tax Returns: Filed with KRA only if you meet specific criteria (resident status or Kenya-sourced income).

Special Considerations for Diaspora Land Owners

1. Do You Need a KRA PIN?

Yes, you should have one. Even if you don’t need to file returns, having a KRA PIN is essential for:

Property transactions (buying, selling, transferring land)
Opening bank accounts in Kenya
Any future business or income-generating activities
Compliance with various government requirements

Getting a PIN is free and can be done online through the KRA iTax portal or at any KRA office when you visit Kenya.

2. What If You Plan to Develop or Sell the Land?

Your tax obligations change when you activate the land:

If You’re Building for Personal Use: Construction itself doesn’t create filing requirements, but you’ll need your PIN for various permits and approvals.

If You’re Building to Rent: Once rental income starts flowing, you MUST register for income tax and file returns, declaring that rental income.

If You’re Selling: Capital Gains Tax (CGT) applies when you sell. The buyer’s lawyer will typically require proof of CGT payment (or exemption) before completing the transaction. You’ll file a CGT return for this specific transaction.

3. Joint Ownership Complications

If you co-own land with someone else (spouse, siblings, business partner):

Each co-owner should have their own PIN
If the land generates income, it should be proportionally declared by each owner
Each owner’s filing requirement depends on their individual residency status

How to Stay Compliant: Your Action Plan

✅ Recommended Steps for Diaspora Land Owners:

Determine Your Residency Status: Count your Kenya days for the year. Be honest about where you truly reside.
Get/Maintain Your PIN: Register for a KRA PIN if you don’t have one. Keep it active.
Pay Land Rates: Don’t confuse this with income tax. Pay your county government annually.
Document Everything: Keep records of travel dates, property documents, and any land-related expenses.
Monitor Any Income: If your land starts generating income (even informally), register and start filing immediately.
Plan for Sale/Development: Factor in CGT and potential rental income tax when planning future land use.
Consider Filing Nil Returns: Even if not required, some diaspora members file “nil returns” (zero income) annually to maintain good standing with KRA. This is optional but can be strategic.

The “Nil Return” Strategy

While not legally required for non-residents with no Kenya income, some tax advisors recommend filing nil returns (returns showing zero taxable income) because:

It keeps your PIN active and compliant
It creates a paper trail of tax compliance
It can help if you later need tax clearance certificates
It demonstrates good faith engagement with KRA

The downside? It creates an annual administrative task. Discuss this strategy with a Kenyan tax consultant to decide what’s best for your situation.

🚨 Penalties for Non-Compliance

If you ARE required to file but don’t, KRA penalties can be severe:

Late Filing Penalty: KES 2,000 per month (maximum KES 20,000)
Interest on Unpaid Tax: 1% per month
PIN Deactivation: Can freeze your ability to transact in Kenya
Legal Consequences: Persistent non-compliance can lead to prosecution

Frequently Asked Questions

Q: I haven’t filed returns in 5 years, but I only own land with no income. Am I in trouble?

If you’re genuinely a non-resident with no Kenya-sourced income, you likely weren’t required to file. However, KRA has periodic tax amnesties where you can regularize your status without penalties. Consider consulting a tax advisor to formally clarify your status.

Q: Can KRA force me to pay tax on land I inherited?

No. Inherited land itself isn’t taxed (though estate duty may have applied at inheritance). You only face tax if the land generates income or when you sell it (capital gains tax).

Q: I visit Kenya for 2 weeks every December. Does this make me a resident?

No. Two weeks is only 14 days, well below the 183-day threshold. You’d be classified as a non-resident for tax purposes.

Q: What if someone is using my land without paying me rent?

If there’s no formal rent payment, there’s no taxable income to declare. However, if someone later claims they’ve been paying you, you could face issues. Always formalize any land-use arrangements.

Q: Do I need to declare my foreign income to KRA?

Only if you’re a tax resident (183+ days in Kenya). Non-residents are only taxed on Kenya-sourced income, so your foreign employment or business income is not KRA’s concern.

Q: How do I file returns from abroad?

KRA’s iTax portal (itax.kra.go.ke) allows you to file returns online from anywhere in the world. You’ll need your PIN and password. Many diaspora Kenyans also hire local tax consultants to file on their behalf.

The Bottom Line

If you’re living abroad (non-resident) and your only connection to Kenya is owning a piece of land that isn’t generating any income, you generally do not need to file annual KRA tax returns.

However, you should:

Maintain an active KRA PIN for future transactions
Pay your annual land rates to the county government
Be prepared to file when circumstances change (land generates income, you sell, or you become a resident)
Consider the strategic value of filing nil returns to maintain compliance records

Tax law can be nuanced, and individual circumstances vary. When in doubt, consult with a qualified Kenyan tax consultant who understands both local tax law and diaspora situations.

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Disclaimer: This article provides general information and should not be considered professional tax advice. Kenya’s tax laws are subject to change, and individual circumstances vary significantly. Always consult with a qualified tax professional or advisor registered with the Institute of Certified Public Accountants of Kenya (ICPAK) before making tax-related decisions.