KRA recently requested Airbnb for details of its hosts in Kenya. Here is information related to the request from KRA.
As you already know, there are quite a number of ways to make money with Airbnb. Once you make the money, the following information can help you get started in learning about some of the tax requirements that might apply to you when providing short-term accommodation in Kenya.
Income from Airbnb is taxed via either:
- Monthly Residential Rental Income Tax, or
- Regular Income Tax
- Value Added Tax
All income from your Airbnb in Kenya is taxable whether you are a resident person or non-resident person. So, even if you do not live in Kenya but have an Airbnb or furnished apartment that you let, you need to pay tax.
- Monthly Residential Rental Income Tax (''MRRIT'')
Where Rental income from providing Airbnb or furnished apartments in Kenya is between KES 288,000 and KES 15 million per annum, it will be taxable at the rate of 10% on the gross rent received either monthly, quarterly or semi-annually.
This regime is only applicable to Kenya residents and is a final tax. This means that no other taxes are payable. Further, Hosts who are accounting for MRRIT are not required to declare their rental income in their regular annual income tax returns.
Please note that no expense is deductible under the MRRIT regime. So, any costs from cleaning, rent and other costs are not considered.
This tax is filed on iTax, on or before the 20th day of the following month. For example, rental income received in January is declared and tax paid on or before 20th February.
In addition to the above, if your income is above 5 million, you shall also need to charge VAT. See below section on VAT as well.
For any month that you do not receive any rental income, you are required to file a NIL return. Failure to file tax returns attracts a penalty at the higher of KES 2,000 or 5% of the tax due while penalties for late filing for companies is the higher of KES 20,000 or 5% of the tax due.
If you wish to be exempted from the MRRIT regime you would need to elect not to be subject to thereto by simple notice, in writing, to the Commissioner of Domestic Taxes (''the Commissioner''). In this case, the residential income earned will be subject to the regular Kenya income tax.
Best Airbnb locations in Kenya.
Let us read below on regular tax.
https://www.youtube.com/watch?v=6GsFVieyiqA
- Regular income tax in Kenya
Business income for companies resident in Kenya is subject to income tax at the rate of 30% on the taxable income. However, businesses not resident in Kenya or that do not have a permanent establishment in Kenya, are taxed at the rate of 37.5%. The personal income tax rate in Kenya is at a graduated scale with the maximum rate at 35% of the gross income of a person.
The adjusted taxable income comprises of gross income earned or derived from Kenya after deducting expenses wholly and exclusively incurred in the production of that income.
Certain expenses may be deductible in computing income tax. The expenses that would be deductible against taxable income may include:
- general operational expenses like rent, service charges.
- interest payable on any loans utilised for working capital requirements
- salaries and wages
Administrative costs and any other expenses incurred wholly and exclusively for purposes of running your furnished apartment. These include costs like rent, cleaning, buying consumables for your Airbnb and furnished apartment.
Capital expenses would include costs for acquisition of the property (excluding repair and maintenance costs which are allowed for deduction). Therefore, cost of repair and maintaining the Airbnb can be reduced
No deduction is allowed for depreciation either, however, wear and tear allowances are allowed for furniture and fittings at the rate of 10% per year on reducing balance.
Where you are engaged in different types of business and earning income from both rental and business income, the expenses that are deductible against rental income are those that are directly and wholly incurred in the production of that rental income and cannot be offset against other types of income.
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Provision of accommodation through serviced apartments, flats, holiday villas, beach cottages and villas, bandas, safari camps for short stays of less than a month are subject to VAT at 16%. Further, a serviced flat or apartment (although for rent longer than one month) which is not under a lease or license is also subject to VAT at 16%. However, provision of residential premises under a lease or license for period longer than a month is excluded from VAT.
Should you make taxable supplies of at least KES 5 million within any period of 12 months, you are required to register and account for VAT. Note that failure to register for VAT where a person has met the VAT registration threshold is an offence under the VAT Act subject to a fine not exceeding KES 200,000 or to imprisonment for a term not exceeding 2 years or to both upon conviction.
The VAT charged (output VAT) can be offset against VAT incurred in providing taxable supplies (input VAT). If you determine that you need to charge VAT on the supplies that you make to guests, please keep in mind that you have to collect this VAT from your guests and report and remit this VAT to the KRA by the 20th day of the following month.
Income tax (exceeding KES 40,000 in a year of income) for companies and individuals is paid in instalments via iTax . Instalment Tax is due on the 20th day of each quarter ending on the 4th, 6th, 9th and 12th month of the year of income.
Any balance of tax (which is the difference between the total instalment tax paid in the year and the actual tax liability computed for the year after the year-end) for companies should be paid by 30 April of the subsequent year.
Individual income tax (for individuals whose tax liability is below KES 40,000) is paid after filing the annual return online via iTax (which should be filed before end of June of the subsequent year as highlighted above).
For all tax payments, a taxpayer (company or individual) is required to generate a payment slip and present it at any of the appointed KRA banks (all commercial banks in Kenya have a KRA bank account and can be used to pay the tax due).
- Reporting tax payment deadline
Late payment of tax is subject to 5% of the tax due and late payment interest of 1% per month on the unpaid tax until the tax is paid in full.
