What is Turnover Tax (TOT)?

Turnover Tax (TOT) is a tax charged on gross sales of a business as per Sec.12 (c) of the Income Tax Act. The tax is payable by resident persons whose gross turnover is more than Ksh 1,000,000 but less than Ksh 50,000,000 in any given year.

What is the effective date of TOT?

1st January 2020

What is the rate of TOT and the due date for filing and paying?

Turnover Tax is charged at the rate of 1% on gross sales. The due date for filing and paying TOT is on the 20th day of the following month.

Does the levying of Turnover Tax and Presumptive Tax amount to double taxation?

No. Presumptive tax is an advance tax that shall be deducted from Turnover Tax payable in the subsequent month(s).

However, Presumptive Tax was repealed(wef 25.04.2020).

 

Are there any exemptions under Turnover Tax?

Income exempt from TOT include;

  • Persons¬†with business income below Ksh 1,000,000 abd above Ksh. 50,000,000
  • Employment income,
  • Rental income,
  • Management and professional services.
  • Any income subject to final withholding tax

Can a taxpayer choose not to be subject to Turnover Tax?

Taxpayers who are eligible for Turnover Tax may opt to be under the provisions of this tax by writing to the Commissioner of Domestic Taxes. However this is subject to approval.

Is Turnover Tax a final tax?

Yes. Persons who declare and pay Turnover Tax will not be required to file annual income tax returns.

What is the penalty for late filing and payment of Turnover Tax?

  • TOT late filing payment is Kshs. 1,000 per month (wef 25.04.2020)
  • Late payment penalty is 5% of the tax due.
  • Interest on unpaid tax is 1% of the principal tax due.

What are the benefits of Turnover Tax?

  1. Reduced expenses; there is no need for accountants, taxpayers are only required to keep a daily gross sales record, there is no requirement to invest in computers and electronic tax registers
  2. Simplified filing and payment processes including payment through mobile phones.
  3. Reduced time for filing and paying taxes.
  4. The tax rate of 1% is lower relative to other rates of tax on income.
  5. Turnover Tax is a final tax and therefore a person is not required to file the annual income tax return.