Kenya Digital Service Tax Introduces More Chaos in Airbnb Operations

Image: Airbnb

The Digital Service Tax sent many tongues wagging, and for good reason: it is still a new concept that is yet to be understood by the majority of Kenyans and those doing business using digital service tools.

According to our legal writer June Okal, who posted an insight about the tax a few months ago, the digital market is a broad definition that cuts through many industries, including e-commerce, payments, name them.

Any digital business is as of Jan 1, 2021, supposed to remit digital service taxes.

Policymakers made a clear indication of how taxes would be collected from the digital marketplace through the introduction of the digital services tax, popularly referred to as DST.  Today, all players in the digital marketplace will be expected to pay 1.5 percent of the gross transaction value to the taxman.

In addition, the law now makes a provision for the Kenya Revenue Authority to appoint an agent for the purpose of collection and remittance of digital service tax. So basically, even if a company doesn’t have a local presence or isn’t registered locally KRA may appoint a tax agent to collect taxes from that entity.

As said, the digital marketplace is big, and includes the likes of Airbnb.

Airbnb is known by many, and is an on-demand platform like Uber, but for a stay.

It would appear that the taxman is extending his DST reach to include the service, which is not surprising because we expected it in the first place.

To this end, which kind of taxes will Airbnb hosts required to pay?

According to Airbnb, hosts in Kenya are supposed to pay VAT and income taxes. The hosts are required to deduct their expenses from income taxes, hence they need to keep receipts of the costs of running their facilities.

Airbnb has also added that Kenya hosts may be subject to other taxes or duties, which is where we think DST comes in.

For now, hosts are required to pay a one-time application fee of KES 1000.

They are then needed to pay KES 26000 in license fees per unit to the Tourism Regulatory Authority (TRA), besides availing key documentation such as original deposit slips for application and license fees, tariff rates, and a copy of a title deed or lease agreement of the facility used.

Hosts must also have home insurance.

Hosts must also ensure that their units are inspected over April, 2021.  

The fees, licenses and the whole inspection program is confusing, bearing in mind that DST is in play.

Hosts should, therefore, and according to Airbnb, ‘check with your local tax advisor or attorney whether your activity may be subject to additional taxes or duties