The Kenya Revenue Authority (KRA) has requested Airbnb to provide historical transaction data of Kenyan hosts on its platform. This request, spanning from January 1, 2021, to December 31, 2022, aims to identify hosts and their earnings. Definitely, it will shed light on potential tax liabilities.
Airbnb Ireland UC, an Irish registered company, serves as the data controller for all Airbnb users in Kenya. Following KRA’s request, the Irish Tax Authority (Irish Revenue) initiated an exchange of information request to obtain specific information about Kenyan hosts. Airbnb, under legal obligations, has been formally asked by Irish Revenue to share this information with KRA.
Soon after President Ruto came to power, Kenya became a signatory of Multilateral Convention on Mutual Administrative Assistance in Tax in September 2022.The convention facilitates for all possible forms of administrative co-operation between states in the assessment and collection of taxes.
Kenyan Airbnb users whose data is included in this exchange of information will receive notifications from Irish Revenue. The notification will simply confirm that their data will be shared with KRA. This move is expected to help KRA better understand the tax obligations of Airbnb hosts. It will ensure that tax revenues are appropriately collected from the platform.
Airbnb Italy Tax Evasion Case
No doubt, Airbnb complies with the request from Kenya to avoid further trouble with tax authorities. Earlier in the week, an Italian judge ruled for the confiscation of US$835.5 million from Airbnb. The ruling is in response to alleged tax evasion accusations. According to prosecutors, Airbnb neglected to collect a substantial tax on approximately €3.7 billion in rental income, a violation of the 21% earnings tax obligation for landlords in Italy.
KRA Relying on Digital Service Tax Law
The request from KRA is in line with a recent trend where the tax authority has been stepping up efforts to collect taxes from digital platforms. Last week, the tax authority told taxpayers that it will analyse eCitizen transactions to make sure they tally with tax returns.
Notably, the data request period is not by chance. It is in January 2021 that the Digital Service Tax came into effect. Digital Services Tax (DST) outlines the framework for tax collection in digital marketplaces. Under this legislation, all participants in digital marketplaces are obligated to remit 1.5 percent of their gross transaction value.
Furthermore, the law has provisions for the KRA to designate tax agents. Tax agents are responsible for collecting and forwarding the digital service tax. This means that even businesses without a local presence or local registration may have a tax agent appointed by KRA to facilitate tax collection.
Digital marketplace encompasses a wide array of online services, including Airbnb, which offers on-demand accommodation. It comes as no surprise that KRA is now relying on DST to go after hosts on Airbnb.
According to Airbnb, hosts in Kenya are subject to Value Added Tax (VAT) and income taxes. The KRA’s decision to obtain transaction data from Airbnb hosts underscores its adoption to the ever-evolving digital economy. This development may also prompt other online platforms to adhere to similar regulatory demands. It will mark a shift in how the online economy is monitored and taxed.