Kenyan Airbnbs Count Losses as Tax Verification Error Drags On

Kenyan Airbnb hosts are facing higher tax deductions and disrupted bookings after an error in the platform's tax verification system caused some valid Kenya Revenue Authority (KRA) PIN details to be rejected.

Airbnb has acknowledged to representatives of its Kenyan host community that there is an error in its system that is declining correct host tax details and said it is working to resolve the problem.

The platform has also committed to refunding hosts who were incorrectly subjected to the higher 20% Withholding Tax (WHT) rate because of the verification problem.

However, the issue remained unresolved for many hosts as of Tuesday, with no refunds reported by affected hosts in the official host community, according to information seen by Money254.

Only about 15 per cent of hosts in the official host club had indicated that their withholding rate had returned to the 5 per cent applicable to qualifying Kenyan hosts.

The tax dispute follows the implementation of Kenya's digital income tax requirements, which require Airbnb to withhold tax from payments to hosts operating in Kenya.

Under the regime introduced through the Finance Act, 2023, digital content monetisation is subject to Withholding Tax at 5 per cent for residents and 20 per cent for non-residents.

Airbnb's guidance for Kenyan hosts provides for a 5 per cent withholding rate for Kenyan residents and non-residents who provide a valid Kenyan PIN. Hosts who do not provide a PIN, or whose tax details cannot be validated, are subjected to the 20 per cent rate.

The difference has significant consequences for hosts.

For every Ksh100,000 in gross earnings, a host subjected to the 5 per cent rate would have Ksh5,000 withheld, compared with Ksh20,000 at the 20 per cent rate.

This means an additional Ksh15,000 is deducted from the host's earnings, in a business that has typically thin margins. 

Also Read: All You Need to Know About Withholding Tax Amid KRA Crackdown

Valid KRA PINs rejected

Hosts say their KRA PINs are valid and their tax details have been confirmed through the KRA system, but Airbnb's verification process continues to reject the information.

One host who spoke to Money254 said they made repeated attempts to submit their tax details after confirming with KRA that their PIN was valid.

The host said Airbnb's system failed to recognise the details despite nearly 20 attempts.

After contacting Airbnb's customer support in India, the case escalated but remained unresolved for several weeks.

The host requested anonymity because of concerns about publicly identifying themselves while their account remains subject to the platform's tax verification process.

Other hosts have reported similar experiences in the official host community.

Airbnb has subsequently acknowledged to host representatives that the verification system is incorrectly rejecting some valid tax details and said it is working on a fix.

Hosts say the deductions are affecting bookings

The tax verification problem has created a second problem for hosts who rely on Airbnb income to operate short-term rental businesses.

Some hosts say they have raised their listing prices to compensate for the additional 15 percentage points being withheld from their earnings.

That, they say, has made their properties less competitive and contributed to fewer bookings.

“We have had to increase our rates on the app, which means we cannot get bookings due to the exaggerated prices,” one of the hosts noted.

Some hosts also said the problem was affecting new properties they had recently added to the platform.

“I have two new units, and this has greatly affected the progression and growth of my new businesses,” one host complained. 

For hosts who have spent months building their listing ratings and booking history, there are also concerns that reduced bookings could affect their visibility and progress towards Airbnb's Superhost programme.

Also Read: KRA to Verify Tax Returns Filed by PIN Holders

Airbnb promises refunds

Airbnb has told host representatives that it will refund hosts who were subjected to the 20 per cent withholding rate as a result of the verification error.

That commitment has provided some relief to affected hosts, but the timing of the refunds remains a concern.

As of Monday, affected hosts in the official host community were reporting that refunds had yet to appear in their accounts.

A message shared among hosts said some accounts had begun reverting to the 5 per cent rate and advised hosts whose details had not yet been corrected to update their Airbnb application and carefully check that their names matched their KRA records.

But only about 15 per cent of hosts in the official host club had indicated that their withholding rate had returned to 5 per cent by Monday, according to information seen by Money254.

Hosts question Airbnb's handling of the rollout

Kenyan hosts have criticised Airbnb's communication about the tax verification process.

Some said they were not given sufficient warning about the changes and had difficulty obtaining clear answers from customer support after the higher deductions began appearing in their payouts.

Also Read: 5 Businesses You Can Start With No Capital During the Christmas Season

The latest frustration for hosts

The Withholding Tax dispute may only be the latest in a series of tax compliance challenges facing the short-term rental business.

The 5 per cent Withholding Tax is not necessarily the end of the tax calculation for a host. The final tax position can depend on the income earned and allowable business expenses, meaning hosts may need to keep proper records and supporting documentation for costs incurred in running their properties.

This presents another challenge for a sector where many businesses operate informally.

Hosts routinely rely on landlords, plumbers, cleaners, handymen, laundry providers and other small service providers to keep their properties running. Many of these suppliers do not issue electronic Tax Invoice Management System (eTIMS) invoices for the services they provide.

This leaves hosts with a difficult gap: they incur genuine costs in running their businesses, but lack the electronic documentation needed to properly support those expenses for tax purposes.