Two years ago, airline tickets booked in Nairobi through a global reservation platform triggered a quiet but consequential tax question: When Kenya Airways and Jambojet flight tickets were sold via the British-based Travel Commerce Platform (TCP), which country should tax the booking fees – Kenya or the United Kingdom?
That question escalated into a Sh2.47 billion cross-border tax dispute between Travelport Services (Kenya) Limited, a subsidiary of a UK firm, and the Kenya Revenue Authority (KRA).
In a landmark decision last week, the Tax Appeals Tribunal ruled that Travelport created a permanent establishment in Kenya for its UK affiliate and must pay additional corporate tax, VAT and withholding tax assessments totalling Sh2.47 billion.
The dispute dates back to December 19, 2024, when the KRA’s Commissioner of Legal Services & Board Coordination issued an additional assessment covering the period from 2019 to 2023.
The assessment primarily targeted corporate tax, VAT and withholding tax linked to airline booking revenues, along with other charges related to intercompany write-offs, interest income and data correction errors.
Initially, KRA assessed the taxes at Sh2.61 billion but reduced the amount to Sh2.47 billion in March 2025 after Travelport Kenya objected. The bulk of the assessment stemmed from airline booking revenues and related cross-border transactions.
KQ, Jambojet contract
Travelport Kenya markets and trains travel agents to use TCP, a computerised reservation system that connects suppliers – including airlines, hotels, car hire companies, rail operators and tour operators – with travel agents who search, compare and book tickets, facilitating travel service management.
Kenya Airways and Jambojet contracted with Travelport’s UK parent entity, Travelport International Operations Limited (TIOL), which operates the platform. When tickets were booked, airlines paid booking fees directly to TIOL abroad.
Travelport Kenya maintained that it only marketed and supported the platform locally, neither negotiating airline contracts nor earning airline revenues. Its income, it claimed, came solely from a cost-plus markup on marketing services.
However, KRA disagreed. After reviewing contracts and transfer pricing documents, the tax authority concluded that the Kenyan subsidiary played a far more substantial role than mere promotion.
It argued that the firm negotiated and finalised sales contracts in Kenya, making its activities “essential and significant” to the group’s business, thereby creating a permanent establishment under Kenyan law and the Kenya-UK Double Taxation Agreement.
Dissatisfied with KRA’s decision, Travelport Kenya escalated the dispute to the tribunal, reiterating its stance as merely a marketing and support arm.
Taxable presence
The company, formerly a wholly owned subsidiary of UK-based Travelport Holdings (UK) Limited and Travelport International Limited, was acquired in August 2021 by Singapore-based GTD, a global travel distribution services provider.
Travelport Kenya contended that all airline income accrued to its UK affiliate and that its cost-plus remuneration model reflected routine services, not core functions warranting a taxable permanent establishment in Kenya.
However, the tribunal sided with KRA, ruling that Travelport Kenya performed core, revenue-generating functions, including attracting customers, negotiating prices and supporting service delivery, thereby establishing a taxable presence in Kenya.
“It is apparent that the appellant performed its core functions and operated as TIOL’s subsidiary, including negotiating contracts and prices for TIOL’s products and coordinating subsequent delivery,” the five-member tribunal ruled.
The tribunal found that Travelport Kenya’s activities exceeded preparatory or auxiliary roles and were central to TIOL’s success in Kenya.
“The absence of these services, solely performed by the appellant while TIOL provided the technology, payment, and commerce platform, determined TIOL’s success in Kenya. Claims that these functions were non-core do not hold water, as they lack legal and evidentiary support,” the tribunal stated.
Booking fees
At the heart of the case were airline booking fees. KRA accused Travelport Kenya of failing to declare income linked to airlines, leading to a Sh1.25 billion corporate tax demand and a Sh578 million VAT charge.
The company countered that all airline revenues were remitted directly to TIOL in the UK and never accrued to the Kenyan entity.
However, the tribunal’s affirmation of a permanent establishment enabled profit attribution, allowing Kenya to tax income earned locally through the subsidiary’s activities.
KRA also challenged Travelport Kenya’s transfer pricing model, which operated on a cost-plus five percent arrangement. The authority argued that the subsidiary’s functions were misclassified as routine marketing when they were, in reality, core business operations.
The tribunal agreed, noting that Travelport Kenya was responsible for “attracting customers, negotiating group product prices with clients, and ensuring subsequent delivery”. It ruled that these functions were central to revenue generation and that the company failed to provide sufficient evidence to overturn KRA’s assessment.
Auxiliary or core?
The dispute extended beyond airline income. KRA disallowed Sh28.6 million booked as data correction errors, deeming them non-deductible under the Income Tax Act.
It also taxed Sh176.6 million in intercompany write-offs as dividends, subject to a 15 percent withholding tax. Travelport Kenya argued these were mere balance sheet adjustments, not profit distributions.
On VAT, the dispute touched on the 2021 Finance Act, which reclassified exported services from zero-rated to exempt between July 2021 and June 2022. KRA rejected Sh15.6 million in input VAT claims for that period.
The tribunal framed the central question as whether Travelport Kenya’s activities were auxiliary or core to the business.
After reviewing agreements and transfer pricing documents, it concluded that the services were “so crucial that TIOL could not succeed in Kenya without the appellant.”
This finding cemented the permanent establishment ruling. The tribunal dismissed Travelport Kenya’s appeal and upheld the Sh2.47 billion assessment.
The decision signals a firm stance against multinational structures that shift profits abroad while maintaining active local operations.
The tribunal affirmed that marketing and distribution functions involving sales negotiation and support were not auxiliary in this case.
