Airbnb Taxation in Kenya: A Guide

This guide is based on enacted legislation: the Tourism Act (Cap. 381) , the Value Added Tax Act (Cap. 476) , the Income Tax Act (Cap. 470) , and the Tourism Regulatory Authority (Tourism Enterprises) Regulations, 2025 (Legal Notice 200 of 2025) .

1. Is Airbnb a Rental Property or a Hotel?

This is the foundational question that determines the entire tax and regulatory framework applicable to short-term rentals in Kenya. The answer, based on enacted legislation and reinforced by judicial authority, is clear: Airbnb is a hotel, not a rental property.

1.1 The Tourism Act Definition

Section 2 of the Tourism Act defines a “hotel” as including “a facility used for the reception of guests and travelers desirous of dwelling or sleeping therein” . This is a broad, functional definition. It is not limited to traditional hotels with hundreds of rooms. Any facility that receives guests for overnight accommodation falls within its scope.

The Ninth Schedule of the Tourism Act lists regulated tourism activities, which include service flats, service apartments, villas, homestays, beach cottages, holiday cottages, guest houses, and hotels. These are precisely the categories under which most Airbnb properties are listed.

1.2 The VAT Act Definition

The Value Added Tax Act provides a more specific definition. Section 2(1) defines a “hotel” as including “premises commonly referred to as ‘service flats’, ‘service apartments’, ‘beach cottages’, ‘holiday cottages’, ‘game lodges’, ‘safari camps’, ‘bandas’ or ‘holiday villas’ and other premises or establishments used for similar purposes” .

1.3 The Exclusion for Long-Term Leases

Critically, the VAT Act definition expressly excludes premises on which the only supply is under a lease or licence of not less than one month, unless the agreement relating thereto provides that by prior arrangement the occupier may, without penalty, terminate the lease or licence on less than one month’s notice. A property let for less than one month — or for one month or more but with a termination clause allowing early exit without penalty — is legally classified as a “hotel” for VAT purposes. Since Airbnb stays are typically for a few days or weeks, they fall squarely within the definition of “hotel.”

1.4 Judicial Authority: The Community Health Promotion Kenya Limited Case

The Tax Appeals Tribunal in Community Health Promotion Kenya Limited v Commissioner of Domestic Taxes (Tax Appeal E367 of 2025) [2026] KETAT 19 (KLR) (9 February 2026) established a critical principle: “The character of income is determined by the nature and use of the property from which the income is derived.”

In that case, the taxpayer had been declaring all its rental income under the Monthly Rental Income (MRI) regime, which applies exclusively to residential properties. However, KRA’s audit revealed that a significant portion of the premises were leased as office space to institutional tenants. The Tribunal held that office space constitutes commercial premises and falls outside the scope of the residential MRI regime. KRA was therefore entitled to reclassify the income and subject it to Corporation Tax.

This ruling applies directly to Airbnb hosts. Short-term letting through platforms such as Airbnb is a commercial activity. The property is used for commercial hospitality purposes, not as a residential tenancy. The character of the income is determined by this commercial use, not by the label the host assigns to it.

1.5 Judicial Authority: The KB Cottages Nairobi Limited Case

The Tax Appeals Tribunal in KB Cottages Nairobi Limited v Commissioner of Domestic Taxes (Tax Appeal E1072 of 2024) [2025] KETAT 232 (KLR) (16 May 2025) established another critical principle: gains or profits from specified sources of income must be computed separately from other income.

In that case, KB Cottages operated a hotel and accommodation business with a restaurant. KRA conducted a compliance check and asserted that KB had under-declared income. KB argued that it operated a single hospitality business and did not have two separate sources of income. However, the Tribunal reviewed KB’s trial balance and financial statements and noted that KB itself identified the consideration from the third-party restaurant operator as rental income. KB’s witness, during cross-examination, also admitted that the consideration was rental income. The Tribunal concluded that the payment made by the restaurant for the occupancy of part of the property was indeed rental income.

The Tribunal then applied Section 15(7) of the Income Tax Act , which explicitly states that gains or profits from “specified sources” — which include “rights granted to other persons for the use or occupation of immovable property” (i.e., rental income) — shall be computed separately from other income. The Tribunal found that KB was legally required to account for this rental income separately from its other business income, and that KRA did not err in its application of Section 15(7). The Corporate Income Tax assessment was upheld.

1.6 Why This Classification Matters

The classification of Airbnb as a hotel rather than a rental property has profound implications. A residential rental property is not required to hold a TRA licence, is not subject to the tourism levy, is exempt from VAT, and is taxed under the Monthly Rental Income (MRI) regime at 7.5% of gross rent. In contrast, an Airbnb property is a commercial hospitality business that requires mandatory TRA licensing, is subject to the 2% tourism levy on gross receipts, is standard-rated for VAT at 16% if turnover exceeds KES 5 million, and its income is taxed as business income under the annual income tax regime at graduated rates up to 35% for individuals or 30% corporate tax.

2. Mandatory Licensing by the Tourism Regulatory Authority (TRA)

2.1 The Statutory Requirement

Under Section 98(1) of the Tourism Act, no person shall undertake any of the tourism activities and services specified in the Ninth Schedule unless that person has a licence issued by the Authority. Section 7(1)(c) further provides that the Tourism Regulatory Authority (TRA) shall register, licence and grade all sustainable tourism and tourist-related activities and services, including cottages and private residences engaged in guest house services.

2.2 Application of the 2025 Regulations

Regulation 3 of the Tourism Regulatory Authority (Tourism Enterprises) Regulations, 2025 provides that these Regulations apply to all tourism enterprises set out under the Ninth Schedule of the Act. This includes service flats, service apartments, villas, homestays, and guest houses — precisely the categories under which Airbnb properties fall. Regulation 15(2) reinforces this by stating that a person or their agent shall not undertake or engage in any tourism enterprise without obtaining a valid licence issued by the Authority. Regulation 24(3) further provides that an unlicensed enterprise shall not be listed on any digital marketing or booking platform.

Legal Consequence: Any person operating a short-term rental property — whether through Airbnb or any other platform, or through traditional offline bookings such as phone reservations, email inquiries, walk-in guests, or referrals — must obtain a licence from the TRA. The licence requirement is attached to the business activity of providing short-term accommodation, not to the platform used to secure bookings. Operating without a licence is an offence under the Act.

2.3 Licensing Fees Under the 2025 Regulations

The First Schedule to the 2025 Regulations sets out the specific licence fees for each category of tourism enterprise. For service flats or service apartments, the application fee is KES 1,000 and the annual licence fee ranges from KES 12,000 for a single unit to KES 65,000 for 21 or more units. The commonly cited annual fee for a serviced apartment is approximately KES 26,000 per unit. For homestays, the application fee is KES 500 and the annual licence fee ranges from KES 1,500 for economy category to KES 4,500 for executive category. For villas, the application fee is KES 1,000 and the annual licence fee is approximately KES 37,000. For guest houses, the application fee is KES 1,000 and the annual licence fee ranges from KES 8,500 for 1-2 beds to KES 30,000 for 13 beds and above. For beach cottages, the application fee is KES 1,000 and the annual licence fee is KES 37,000. For holiday cottages, the application fee is KES 1,000 and the annual licence fee is KES 30,000.

2.4 Mandatory Association Membership

Regulation 17 of the 2025 Regulations introduces a new requirement: a tourism enterprise shall, where applicable, be a member of a recognised sector or professional association representing its category of tourism services. A tourism enterprise that operates without valid membership of a recognised sector or professional association commits an offence and the Authority may take administrative measures to ensure compliance.

2.5 Penalties for Late Renewal

Regulation 20 provides that any application submitted after the expiry date of the license shall be liable to a penalty of ten percent of the fees payable for each month defaulted.

2.6 Display of Licence

Regulation 19(6) requires that a proprietor or an agent of a licensed tourism enterprise shall ensure that the license is prominently displayed within the premises of the tourism enterprise. Regulation 19(7) further requires that a proprietor or an agent of a licensed tourism enterprise advertising their business or service online either on the enterprise’s website, on digital marketing or online booking platforms shall prominently list their license identification features including serial numbers or quick response codes at all times. Regulation 19(8) provides that failure to exhibit the licence commits an offence and is liable to a penalty under Section 112(2) of the Act.

3. Mandatory Standards and Quality Compliance

3.1 Mandatory Standards

Regulation 4 of the 2025 Regulations requires every tourism enterprise to comply with mandatory standards as a condition of licensing, accreditation, and continued operation. These standards include maintaining hygiene and sanitation standards appropriate to the nature of the enterprise, implementing safety measures including fire-safety installations and emergency procedures, ensuring adequate security arrangements, meeting mandatory quality standards in the provision of accommodation, maintaining operational service standards that ensure timely and professional service delivery, and complying with sector-specific codes of practice.

3.2 Accreditation and Classification

Regulation 6 requires licensed tourism enterprises to apply for accreditation every two years. The Authority awards a mark of quality to signify compliance with enhanced accreditation criteria. Regulation 7 requires accredited Class “A” and “B” enterprises to undergo classification and grading once every five years. Classified enterprises are graded from one star to five stars, with five stars being the highest classification.

The accreditation fee for Class “A” and “B” enterprises and other tourism enterprises is KES 100,000. The classification or reclassification fee for Class “A” and “B” enterprises is KES 250,000.

3.3 Offences and Penalties

Regulation 14 provides that a proprietor who fails to subject themselves to the national accreditation or classification exercise within six months of completion commits an offence and is liable to a penalty under Section 112(2) of the Tourism Act, which provides for a fine not exceeding KES 100,000 or imprisonment for a term not exceeding 18 months, or both.

4. The Tourism Levy

Section 105 of the Tourism Act empowers the Cabinet Secretary to require the payment of a tourism levy by persons engaged in tourism activities and services. All monies received in respect of the tourism levy are paid into the Tourism Fund established under Section 67.

Legal Consequence: Short-term rental properties that fall within the Ninth Schedule are subject to the tourism levy at a rate of 2% of gross receipts from accommodation charges. Failure to remit the monthly levy by the 10th of the following month attracts a penalty.

5. Value Added Tax (VAT)

5.1 Classification as a Taxable Supply

As established above, short-term stays of less than one month are classified as “hotel” accommodation under the VAT Act. The supply of such accommodation is therefore a taxable supply under Section 5(1)(a) of the VAT Act.

5.2 The VAT Rate

Under Section 5(2)(b) , the standard VAT rate is 16%.

5.3 The Registration Threshold

Section 34(1) of the VAT Act requires registration for VAT where a person has made taxable supplies or expects to make taxable supplies, the value of which is five million shillings or more in any period of twelve months.

In the Community Health Promotion Kenya Limited case, the Tribunal found that while the supply of land and residential premises is exempt under the VAT Act, the exemption does not extend to commercial premises. The Appellant’s own declarations and lease agreements showed taxable turnover exceeded the statutory threshold, making the VAT assessment lawful. Section 34 of the VAT Act empowers the Commissioner to register a person who qualifies but fails to do so voluntarily.

Legal Consequence: If your annual Airbnb turnover is below KES 5 million, you are not required to register for VAT or charge VAT on your bookings. If your annual turnover exceeds KES 5 million, you must register for VAT, charge 16% on your bookings, issue tax invoices, file monthly returns by the 20th of the following month, and maintain proper records for five years.

6. Income Tax

6.1 The Distinction Between Short-Term Letting and Long-Term Leasing

For tax purposes, it is essential to distinguish between short-term holiday letting (Airbnb), which is business income, and long-term residential leasing (one month or more), which is rental income. The legal relationship between a host and a guest in a short-term letting is a licence, not a lease. The property is used for commercial hospitality purposes, not as a residential tenancy. This income falls under the business income category, not rental income. In contrast, long-term residential leasing creates a legal relationship that is a lease, which creates an interest in land, and the income is rental income.

6.2 The MRI Regime Does Not Apply to Short-Term Lets

Because short-term letting is a commercial hospitality business, the MRI regime — which taxes resident landlords at 7.5% of gross rent with no deductions — does not apply to Airbnb income. This position is reinforced by the Community Health Promotion Kenya Limited case. The Tribunal held that office space constitutes commercial premises and falls outside the scope of the residential MRI regime. The same principle applies to short-term rentals — they are commercial premises and therefore outside the MRI regime.

6.3 Specified Sources Must Be Computed Separately

Section 15(7) of the Income Tax Act explicitly states that gains or profits from “specified sources” — which include rental income — shall be computed separately from other income. Rental income is a specified source of income under Section 15(7)(e)(i) of the ITA. The specified sources of income as identified by the ITA include rent, employment, agricultural and business income, among others.

In the KB Cottages Nairobi Limited v Commissioner of Domestic Taxes (Tax Appeal E1072 of 2024) [2025] KETAT 232 (KLR) (16 May 2025) case, the Tribunal found that KB generated rental income from a third-party restaurant operator occupying part of its property. The Tribunal held that the consideration paid by the third party for the occupancy of the premises constituted rental income, as it was a payment for the use or occupation of immovable property. KB was legally required to account for this rental income separately from its other business income (hotel and accommodation). The Corporate Income Tax assessment was upheld.

For Airbnb hosts, this means that short-term holiday letting (Airbnb) is business income, not rental income. Long-term residential leasing (one month or more) is rental income — a specified source under Section 15(7). If you earn both short-term letting income and long-term rental income from the same property or different properties, these are different sources of income and must be computed separately. You cannot mix specified sources of income for tax purposes. Losses from one specified source cannot be used to offset profits from another specified source. Proper records must be maintained for each income stream, including separate accounting for expenses attributable to each source.

6.4 Taxation of Short-Term Letting Income

For individuals operating short-term rentals, income is taxed as business income under the annual income tax regime. A sole proprietor is subject to graduated individual rates up to 35% . A company is subject to corporate income tax at 30% on net profit.

Deductions are allowed for expenses “wholly and exclusively incurred in the production of income” under Section 15 of the Income Tax Act. In the Community Health Promotion Kenya Limited case, a substantial portion of the claimed expenses — including directors’ travel, accommodation, allowances, professional licensing fees, and cash withdrawals — were disallowed because the company failed to demonstrate a direct nexus between these expenses and the earning of commercial rental income. This reinforces that for Airbnb hosts, all claimed deductions must have a direct connection to the earning of short-term rental income.

Allowable deductions include platform commissions (as charged by the booking platform), cleaning and laundry costs, utilities (water, electricity, internet), property management fees, repairs and maintenance, mortgage interest, insurance premiums, advertising and marketing costs, depreciation, TRA licence fees, and accreditation and classification fees.

6.5 Non-Resident Hosts

The Finance Act, 2026 introduced a Non-Resident Rental Income Tax (NRRIT) at a rate of 30% on gross rent from immovable property. This is a final withholding tax for non-residents earning rental income. However, the NRRIT applies specifically to rental income from immovable property. As established above, short-term letting through Airbnb is classified as business income, not rental income. Therefore, the NRRIT regime does not apply to Airbnb income. Non-resident hosts operating Airbnbs are taxed under the standard business income regime, with deductions allowed for business expenses.

6.6 Turnover Tax (TOT) — Section 12C of the Income Tax Act

Section 12C of the Income Tax Act provides for Turnover Tax, a presumptive tax for small businesses. The key provisions are:

• A resident person whose turnover from business is more than KES 1 million but does not exceed KES 25 million during any year of income is liable to turnover tax.
• A person who would otherwise be liable to pay turnover tax may elect, by notice in writing to the Commissioner, not to be subject to turnover tax, in which case the other provisions of the Income Tax Act shall apply.
• Turnover tax shall not apply to rental income, management or professional or training fees, or any income which is subject to a final withholding tax under the Income Tax Act.
• A person subject to turnover tax must submit a return and pay the tax due on or before the twentieth day of the month following the end of the tax period (a calendar month).

Application to Airbnb Hosts:

• Non-Resident Hosts: Since Airbnb income is business income (not rental income), and turnover tax applies only to resident persons, non-resident hosts are not liable for turnover tax. Under the Finance Act, 2026, income derived by a non-resident from a digital marketplace is subject to a 20% final withholding tax. Therefore, non-resident hosts cannot be subject to Turnover Tax.
• Resident Hosts: A resident host whose annual turnover is between KES 1 million and KES 25 million may be subject to turnover tax. However, the host may elect to opt out of turnover tax by notice in writing to the Commissioner, in which case the standard income tax provisions apply — which would allow deductions for business expenses.

The Practical Absurdity of TOT for Resident Airbnb Hosts

For resident hosts, the 5% withholding tax deducted by platforms like Airbnb is generally not a final tax but a credit against their total tax liability. Thus, they remain eligible for TOT if they meet the turnover criteria. However, there is a significant practical absurdity.

The TOT rate is 1.5% of gross receipts. Yet the platform withholding rate for resident persons on digital platforms is 5%, which is significantly higher than the TOT liability. This means a resident Airbnb host will almost always be in a permanent tax credit position.

Section 39(1) of the Income Tax Act provides that any amount of tax deducted at source (WHT) is “deemed to have been paid by the person chargeable with that tax” and “shall be set off for the purposes of collection against the tax charged on that person for the year of income in respect of which it was deducted.” This provides the legal authority for the WHT credit to be applied against the TOT liability.

However, the TOT return does not have an option for deducting WHT. WHT is typically reconciled at year-end, not monthly, while TOT is a monthly obligation. This creates a significant administrative hurdle. To claim the credit, the taxpayer must rely on the set-off mechanism under Section 47 of the Tax Procedures Act, which allows a taxpayer who has overpaid tax to apply to the Commissioner to offset the overpaid tax against “outstanding tax debts and future tax liabilities.”

The Administrative Challenge: Delays and Audits

Applying for a set-off or refund of WHT against TOT may not be a straightforward process. It may can take years and potentially trigger deeper audits. During this period, the set-off application is frozen, and the taxpayer does not receive the benefit of the WHT credit.

Furthermore, frequent or large refund claims are a primary trigger for audits. KRA now cross-references information from eTIMS, bank statements, M-Pesa records, and third-party reporting. If there are discrepancies between the income declared and the income reflected in these sources, the application is likely to be questioned, delaying the processing and potentially leading to a full audit.

This is the practical reality for a resident Airbnb host who chooses to be subject to TOT. While the law provides mechanisms for set-off and credit, the administrative challenges and audit risks make TOT a less attractive option than it may appear on paper.

7. Digital Marketplace Withholding Tax Under Section 10 of the Income Tax Act

7.1 The Legal Provision

Section 10(1)(m) of the Income Tax Act provides that where a resident person or a person having a permanent establishment in Kenya makes a payment to any other person in respect of making or facilitating payment over a digital marketplace, the amount thereof shall be deemed to be income which accrued in or was derived from Kenya. Section 10(4) further provides that where a resident or a non-resident person, being the owner or operator of a digital marketplace or platform, makes or facilitates payment in respect of digital content monetisation, property or services, the amount thereof shall be deemed to be income which accrued in or was derived from Kenya. Section 10(5) defines “platform” as a digital platform or website that facilitates the exchange of a short-term engagement, freelance or provision of a service, between a service provider, who is an independent contractor or freelancer, and a client or customer.

7.2 Application to Booking Platforms

Booking platforms such as Airbnb are owners or operators of a digital marketplace or platform that facilitates payment for property or services. They are therefore subject to the withholding obligation under Section 10(4). In simple terms, they deduct Withholding Tax from the payments facilitated via their platform.

7.3 How the Withholding Works

Under the Tax Laws (Amendment) Act, 2024, withholding tax was introduced on payments made or facilitated by owners or operators of digital marketplaces. The statutory rates are 5% for resident persons and 20% for non-resident persons. The law does not condition the withholding rate on possession of a KRA PIN. The distinction drawn by the law is solely between resident and non-resident persons.

7.4 Platform PIN Policies

While the law itself does not condition the withholding rate on possession of a PIN, platforms like Airbnb have implemented a policy requiring hosts to provide a valid KRA PIN to be eligible for the lower 5% withholding rate. Without a PIN, the platform may apply the 20% rate as a default measure to manage compliance risk. This is a platform operational policy, not a statutory requirement.

7.5 Key Legal Consequences

Section 10(4) deems the amount paid or facilitated through the digital marketplace to be income that accrued in or was derived from Kenya. This means that even if the host is a non-resident, the income is sourced in Kenya and subject to Kenyan tax. The amount withheld by the platform under Section 35 is creditable against the host’s overall tax liability under the applicable income tax regime. When a guest pays the host directly — by cash, M-Pesa, bank transfer, or through a payment gateway like Paystack or DPO — the platform has not “facilitated the payment” within the meaning of Section 10(1)(m) or Section 10(4). Therefore, no withholding tax is applied. However, the host remains responsible for declaring and paying tax on that income under the applicable regime.

8. Platform Commissions

Platform commissions charged by booking platforms such as Airbnb are deductible business expenses for income tax purposes under Section 15 of the Income Tax Act, as they are expenses “wholly and exclusively incurred in the production of income.” Specific commission rates charged by platforms may vary depending on the fee structure applicable to the listing, the jurisdiction, and the terms agreed between the host and the platform. Hosts should refer to their platform’s terms and conditions for the applicable commission rates. Depending on the laws of the jurisdiction involved, VAT may be applicable to platform service fees. The service fee shown to hosts and guests is VAT inclusive, where applicable.

9. Employer Payroll Obligations

If an Airbnb host employs staff, they become an employer with statutory payroll obligations under Kenyan law. The key obligations are:

Social Health Insurance Fund (SHIF) : Employers must deduct 2.75% of each employee’s gross monthly salary and remit to the Social Health Authority by the 9th day of the following month. Failure to remit on time attracts a penalty of 2% of the unpaid amount for each month it remains unpaid.

Affordable Housing Levy (AHL) : Employers and employees each contribute 1.5% of the employee’s gross monthly salary (total 3%). Remittance is due by the 9th working day through iTax, with a penalty of 3% per month on the outstanding amount for late payment.

Pay As You Earn (PAYE) : Employers must deduct income tax from employee salaries based on progressive rates: 10% up to KES 24,000, 25% on KES 24,001 to KES 32,333, 30% on KES 32,334 to KES 500,000, 32.5% on KES 500,001 to KES 800,000, and 35% above KES 800,000. A personal relief of KES 2,400 per month applies. Remittance is due by the 9th of the following month, with a penalty of 25% of the tax due or KES 10,000, plus 5% penalty and 1% interest per month for late payment.

National Social Security Fund (NSSF) : Employers must deduct 6% of the employee’s pensionable earnings and match it with a 6% employer contribution. Effective 1 February 2026, the Lower Earnings Limit (Tier I) is KES 9,000, resulting in a contribution of KES 540 each for employer and employee. The Upper Earnings Limit (Tier II) is KES 108,000, with a maximum combined contribution of KES 12,960 per month. Remittance is due by the 9th of the following month.

National Industrial Training Authority (NITA) Levy : Employers with one or more employees must contribute KES 50 per employee per month. Failure to remit on time attracts penalties of up to 5% of the unpaid amount per month.

All statutory remittances must be filed through the Unified P10 return on iTax by the 9th of the following month. Hosts employing staff are strongly advised to engage a qualified payroll service provider or tax professional to ensure compliance and avoid significant penalties.

10. Record-Keeping and Data Submission Requirements

10.1 Records to Be Kept

Regulation 26 of the 2025 Regulations requires every licensee to keep record of personal details of every guest, employee, and trainee for a period of not less than five years, and to keep a record of all such particulars in relation to business operations as may be specified by the Authority.

10.2 Data Submission

Regulation 27 requires the holder of a licence to submit at the end of every month, data in respect of the tourism enterprise in a format specified by the Authority, which includes bed occupancy, number of visitors by country of origin, and revenue earnings.

10.3 Penalties for Non-Compliance

Regulation 27(3) provides that a person who contravenes this regulation commits an offence and shall, on conviction, be liable to a penalty provided for under section 112(2) of the Act.

11. Enforcement and Closure Provisions

11.1 Quality Audits

Regulation 29 provides that quality audits shall be carried out without prior notice unless such notice is deemed necessary by an authorized officer. Authorized officers may require any person to produce any document or record within seven days.

11.2 Closure of Tourism Enterprises

Regulation 30 provides that an authorized officer may, with the written approval of the Director-General, order the immediate closure of a tourism enterprise where a tourism enterprise has failed to comply with a notice issued under Regulation 29(5), or where a tourism enterprise’s license has been suspended, cancelled, or revoked.

12. Conclusion

The legal framework for short-term rentals in Kenya is established in enacted legislation and subsidiary regulations, reinforced by judicial authority. The Tourism Act (Cap. 381) classifies short-term rentals as hotels, requiring licensing and payment of the tourism levy at 2% of gross receipts. The Tourism Regulatory Authority (Tourism Enterprises) Regulations, 2025 provides detailed licensing fees, mandatory standards, accreditation and classification requirements, record-keeping obligations, and enforcement provisions. The Value Added Tax Act (Cap. 476) classifies short-term stays (less than one month) as hotel accommodation, subject to VAT at 16% if turnover exceeds KES 5 million. The Income Tax Act (Cap. 470) treats short-term letting income as business income, not residential rental income. The MRI regime does not apply. Section 15(7) requires specified sources of income — including rental income — to be computed separately from other income. The NRRIT applies to rental income, not Airbnb income. Individuals are taxed at graduated rates up to 35%. Section 10 of the Income Tax Act requires digital marketplace operators to withhold tax at 5% for residents and 20% for non-residents on payments they facilitate. The law does not condition the withholding rate on possession of a KRA PIN; the distinction is solely between resident and non-resident persons. Section 12C provides for turnover tax for businesses with turnover between KES 1 million and KES 25 million. Non-resident hosts are not liable for turnover tax as their income is subject to a 20% final withholding tax.

Hosts who employ staff must also comply with employer payroll obligations, including deducting and remitting SHIF at 2.75% of gross salary, AHL at 1.5% employee and 1.5% employer, PAYE at progressive rates up to 35%, NSSF at 6% employee and 6% employer with Tier I and Tier II limits, and the NITA Levy at KES 50 per employee per month. All remittances are due by the 9th of the following month, with significant penalties for late payment.

The licence requirement applies to all short-term rental operations regardless of how bookings are generated — whether through digital platforms like Airbnb or through traditional offline bookings. The obligation is attached to the business activity of providing short-term accommodation, not to the platform used to secure bookings.

Compliance with these legal requirements is mandatory. Hosts are advised to engage a qualified tax and legal professional for assistance with registration, filing, and ongoing compliance.

Disclaimer: This guide is based on enacted legislation and subsidiary regulations as of August 2026 and is for informational purposes only. It does not constitute legal or tax advice. Tax laws are subject to change, and individual circumstances vary. You should engage a qualified professional for advice tailored to your specific situation.