The Tourism Fund is set to expand the 2.0 percent tourism levy to operators of short-term rentals sold through digital hospitality platforms such as Airbnb, Booking.com and Jumia in a bid to grow and modernise tourism revenue collection by taxing bookings at source.
The Tourism Fund (TF) says the shift, slated to start by the end of June, will bring online accommodation providers into the formal levy system, addressing enforcement gaps created by the rapid growth of short-term rentals and digital booking platforms.
Latest official figures from the State Department for Tourism show the Fund collected Sh5.1 billion from the levy in the year ended June 2025, falling short of Sh5.5 billion target.
This was, however, a growth from Sh4.9 billion collected in the year ended June 2024 and Sh3.9 billion in the year ended June 2023.
The Fund attributed the shortfall in the 2024/25 financial year largely to its inability to collect the levy from short-term rentals, including Airbnbs, homestays and villas, which operate largely outside traditional enforcement mechanisms.
TF chairperson Samson Some says there is no legal hurdle to collecting the tourism levy from online platforms, stressing that the challenge has been largely operational rather than legislative.
“There is no legal gap,” Mr Some said in an interview. “The systems we had were built for traditional hotels, restaurants and bars. What has changed is the entry of digital platforms and short-term rentals, which the old systems were not designed to capture.”
Under the Tourism law, regulated hotels, restaurants and other licensed tourism establishments are required to remit a two percent tourism levy on gross sales to the Tourism Fund.
Failure to remit the monthly levy by 10th of the following month attracts an instant fine of Sh5,000 in addition to a penalty of three percent of the amount due for each month it remains in arrears.
However, the expansion of short-term rentals has complicated compliance, particularly where operators manage multiple units within residential buildings or relocate properties while retaining the same online identity.
“You may have someone running 10 units on one floor of a residential block while the rest of the building is private housing,” Mr Some said. “Without the right digital system, you may not even identify the operator, let alone enforce levy collection.”
Under the proposed model, the levy would be deducted automatically at the point of booking, with platforms remitting the required amount directly to the Tourism Fund. The approach mirrors systems already in use in other African markets, notably Rwanda and South Africa.
In Rwanda, accommodation service providers — including short-term rental operators using platforms such as Airbnb — are required to pay a tourism tax of 3 percent of the amount paid by guests to the Rwanda Revenue Authority.
The tax, effective from July 2025, is collected directly from guests at the point of sale, with providers required to register with the tax authority and issue Electronic Billing Machine invoices.
South Africa has adopted a data-driven enforcement approach, where platforms such as Airbnb provide transaction details to the South African Revenue Service upon request.
The information includes host identities, gross earnings, platform fees, property addresses, rental periods and bank details, enabling authorities to track compliance without physically inspecting properties.
“If $100 (about Sh12,900) is collected from a guest, a percentage is remitted directly through the system,” Mr Some said. “That way, we don’t have to chase operators to their residences or follow properties that keep shifting locations.”
The TF plans to implement the system through third-party digital payment partners, similar to how Kenya’s eCitizen platform facilitates visa fee collection.
While the board had initially targeted a rollout in the current quarter (January-March), engagement with external providers has delayed implementation to the next quarter (April-June).
“We were on schedule as a board, but this is not just a fund discussion —it involves third-party participants,” Mr Some said. “We expect to have a system in place by next quarter.”
The Fund has called on short-term rental operators to formalise their businesses through licensing and membership in tourism associations, which Mr Some said offer legal protection, access to training and improved security.
As part of its capacity-building efforts, the Tourism Fund says it has certified more than 7,000 tourism workers nationwide through two-tier training programmes targeting technical staff and managers, covering areas such as housekeeping, security, financial management and destination marketing.
“These are not just regulatory requirements,” Mr Some said. “Training improves service quality and productivity, and it directly affects the bottom line for operators.”
