Tax on Airbnb and Short-Stay Income in Kenya

Yes, short-stay income is taxable in Kenya, but the law does not clearly say how. We could not find a provision or KRA guidance that says whether Airbnb-style income falls under the 7.5 percent residential rental regime or counts as ordinary business income. VAT is clearer, and a host above KES 5 million a year should expect it to apply. The Tourism levy’s position on short stays is not confirmed.

Income tax: why the position is unclear

The Income Tax Act gives two possible routes.

Residential rental income tax. Section 6A covers income “for the use or occupation of residential property”, at 7.5 percent of gross rent with no expenses. The band is above KES 288,000 and up to KES 15 million a year. A guest does use or occupy the property, which points towards this regime. The regulations define property as a building occupied as a residential house, and neither they nor the Act mention short stays.

Business income. Under section 3(2)(a), profits from a business are taxed through the annual return, after allowable expenses. Other parts of Kenyan law treat short stays as hospitality, not letting:

• The VAT Act’s definition of a hotel includes service apartments, holiday cottages and holiday villas.
• The Tourism Act lists service apartments, villas, homestays and guest houses as regulated tourism enterprises.

Those two Acts do not decide your income tax, but they do show how the law sees this activity. A furnished short-stay operation can look like an accommodation business. Cleaning, linen, check-in and similar services between guests make that view stronger.

Turnover tax depends on the same question. Section 12C applies to business turnover above KES 1 million and up to KES 25 million, but it excludes rental income. So it can apply only if your income is business income. See turnover tax or income tax.

How to get a firm answer

Do not pick a regime only because it looks cheaper. If KRA later disagrees, it can assess you for the difference, with penalties and interest.

1. Write down the facts. List your units, typical stay lengths, services included and yearly income from each platform.
2. Ask KRA in writing. Section 65 of the Tax Procedures Act provides for binding private rulings, where KRA gives you its position on your facts. Your adviser can tell you whether that route suits your case.
3. Be consistent. Whichever position you take, declare all your income and keep your reasoning on file.
4. Keep full records. Keep platform payout statements, bookings, invoices and bank or M-Pesa statements for five years: section 23. If business income applies, expenses need proper support, so keep them from day one.

Long lets are different. If a tenant takes a flat on an ordinary lease, that rent fits the residential regime for landlords. If you do both, keep separate records for each unit.

VAT

The VAT Act is more helpful here. Letting of residential premises is exempt under paragraph 8 of the First Schedule list of exempt services. However, that paragraph says residential premises do not include hotel or holiday accommodation.

Section 2 defines a hotel to include service flats, service apartments, beach and holiday cottages, holiday villas and similar premises. It leaves out premises where the only supply is a lease or licence of at least one month, unless the occupier can leave on shorter notice without penalty.

Here is what that means in practice:

• Stays of under a month in these kinds of premises look like taxable supplies, not exempt residential letting.
• Registration is required once your taxable supplies reach KES 5 million in 12 months, or you expect them to. You must apply within 30 days: section 34. See crossing the 5 million line.
• All your taxable supplies count towards the limit, not only one unit or one platform.

KRA has not, as far as we can find, published guidance on a single ordinary flat let by the night. The definition also reaches other premises used for similar purposes, which suggests it is covered, but ask KRA if your turnover is near the limit.

Tourism levy and licensing

Section 105 of the Tourism Act lets the Cabinet Secretary order a tourism levy on people engaged in tourism activities. Section 98 requires a licence for the activities listed in the Ninth Schedule, which include villas, homestays, guest houses and service apartments.

You may have heard that the Tourism Fund planned to extend a 2 percent levy to short-stay rentals on platforms such as Airbnb and Booking.com, with collection aimed for the end of June 2026. We could not find a gazetted order that confirms this has started or how it works. Ask the Tourism Fund and the Tourism Regulatory Authority what applies to you now.

Points we could not confirm

• Platform withholding. Online guides give different figures for tax that platforms deduct from hosts in Kenya, and we could not confirm any of them at source. Check your payout statements and ask the platform in writing. Do not assume a deduction covers your tax.
• County charges. Business permits and other county requirements vary, so check with your county.

If you own the property from outside Kenya, section 6B may apply instead, so get advice on your own position. Our tax team can help you set out your facts for KRA.