Is Travelport, The Kenyan Subsidiary A Permanent Establishment?

Case Study: Travelport Services (Kenya) Limited v Commissioner of Legal Services & Board Coordination (Tax Appeal E445 of 2025) [2026] KETAT 25 (KLR) (25 February 2026) (Judgment)

Background

Travelport Services (Kenya) Limited (TKE), a subsidiary of UK-based Travelport International Operations Limited (TIOL), provides marketing and customer support services for TIOL’s computerized travel reservation system (the “Travel Commerce Platform”) in Kenya. Following a tax verification for the period 2019-2023, KRA issued an additional assessment of KShs. 2.618 billion, later confirmed at KShs. 2.472 billion, covering corporate tax, VAT, and withholding tax.

The central contention? Whether TKE constituted a Permanent Establishment( PE) of TIOL in Kenya, thereby rendering it liable for tax on income generated from Kenyan operations.

The Tribunal’s Reasoning

Core Functions vs. Auxiliary Activities

TKE argued that it was merely an independent marketing agent, operating under a Marketing Recharge Agreement that expressly precluded it from contracting with travel providers like airlines. Its role, it contended, was limited to promoting the platform and training users—functions that should qualify for the “independent agent exception” under Article 5(7) of the Kenya-UK Double Taxation Agreement (DTA).

The Tribunal was unconvinced. Examining the Marketing Recharge Agreement alongside TKE’s own Transfer Pricing documentation, the Tribunal found that TKE’s activities extended far beyond routine marketing:

• Attracting customers and negotiating prices of group products with clients
• Concluding contracts with subscribers
• Delivering products to clients
• Providing after-sales support, troubleshooting, and maintenance

Crucially, the Tribunal noted that TIOL’s role was described as “rendering distribution, technology payment, and other services using the TIOL Travel Commerce Platform,” while TKE, its subsidiary,  handled customer acquisition, contract negotiation, and product delivery—functions manifestly central to TIOL’s business success in Kenya.

The Legal Framework

Section 2 of Kenya’s Income Tax Act defines a PE to include “a dependent agent of a person who acts on their behalf in respect of any activities that that person undertakes in Kenya, including habitually concluding contracts or playing the principal role leading to the conclusion of contracts.”

Article 5(5) of the OECD Model Tax Convention (mirrored in the Kenya-UK DTA) similarly provides that a PE exists where a person “habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts” on behalf of an enterprise.

The Tribunal applied these provisions rigorously, finding that TKE’s activities checked every box for PE status. The fact that contracts were ultimately “in the name of” TIOL or that TIOL owned the intellectual property was irrelevant—what mattered was that TKE played the principal role in bringing those contracts into existence.

Burden of Proof

The Appellant also challenged specific tax heads, arguing that:

• Income from airlines like Kenya Airways flowed directly to TIOL, not TKE
• Inter-company write-offs during an acquisition were balance sheet adjustments, not taxable dividends
• Input VAT claims were legitimate for certain periods

However, the Tribunal applied Section 56 of the Tax Procedures Act and Section 30 of the Tax Appeals Tribunal Act, which place the burden on the taxpayer to prove an assessment is excessive. The documents TKE provided—Excel worksheets, payment slips, invoices—lacked probative value and failed to displace KRA’s assessment.

Conclusion

In the words of the Tribunal, citing its earlier decisions in ECP Kenya Limited and GTZ International Services, the key question is whether local subsidiary activities are “auxiliary or routine” or whether they constitute “the business of the [foreign enterprise].”