- What is the process of registering a short-term rental?
Unfortunately in Kenya, no unified framework exists for the registration of short-term rentals. A reason for this might be that the proliferation of short-term guest accommodation has been a very recent phenomenon spurred by the entry of online platforms such as Airbnb and Booking.com. Even countries in Europe such as England and Scotland have only very recently started broaching the issue of registration and licensing of short-term lettings.
You would be hard-pressed even to find a definition of “short-term rental” in our legislation because the arrangement falls outside the common “lease” concept which Kenyans are more familiar with.
Legally, the relationship between a short-term renter or host and their guest is a license. Under our laws, a license, which only amounts to the creation of personal rights between the parties concerned does not create any interest in the property and is not an instrument affecting land under the Land Registration Act, 2012. The Land Registries do therefore not accept licences for registration.
Regarding general requirements, please note that from a tax perspective, a person operating short-term letting would need to register with the Kenya Revenue Authority and be issued a PIN. He or she would also be required to file tax returns and pay income tax on the business income earned from this.
Under the Tourism Act, any person carrying out “tourism activities and services” listed in the Ninth Schedule of the Tourism Act must obtain a license issued by the Tourism Regulatory Authority. The services in the Ninth Schedule include service flats, service apartments, villas, homestays, and guest house services.
- What are the different taxes and levies involved?
Commercial income from the use of property is subject to income tax at rates between 10% and 30% for short-term renters or hosts who are individuals. Further hosts with an annual turnover of taxable supplies over KES 5 million are required to register for and to charge VAT.
Separately, under the Tourism Act, hosts who are licensees are required to remit 2% of gross receipts for monthly sales of food, drinks, accommodation, and all other services to the Kenya Tourism Board.
- What is the compliance rate?
Compliance rates are low for short-term rentals in terms of owners or hosts registering for tax and licensing with the Tourism Regulatory Authority.
An obvious reason is the lack of a clear legislative framework for the business of short-term rentals. Because of this, the operations fall into the informal sector which is opaque and harder to regulate. An example of this lack of clarity would be in the case of the Tourism Act which requires operations in respect of service flats, and beach cottages to be licensed. However, it is not clear whether hosts letting rooms in their premises or letting out the entire premises on a short-stay basis would be classified as homestays or guest house services.
Until a mandatory and clear framework is created to regulate short lets, compliance will remain low.
- Consequences of advertising a short-term rental using a logo such as Airbnb when it is not registered with Airbnb
Host duping the public by passing off their properties as affiliated with trusted brands such as Airbnb and Booking.com are engaging in brand infringement. Kenya’s intellectual property laws shield trademarks (which include brand logos and brand names) against third-party infringement. Such individuals are laying themselves bare to costly trademark infringement suits.
Further, a host or short-term renter making false, misleading, or deceptive representation about affiliation or connection to Airbnb and Booking.com that do not exist is engaging in an unfair practice under the Consumer Protection Act for which a fine of KES 1,000,000 and a prison term of 3 years can accrue on conviction.
Please contact Divinah Sarange Ongaki (dso@smc-legal.com or info@smc-legal.com) in case you require any clarification on the contents of this article.