What is Turnover Tax (TOT)?
Turnover Tax is a tax payable by small businesses whose gross sales do not exceed or is not expected to exceed Kshs. 5 million per 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?
3% on the gross sales every month. Filing and paying is done 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).
Are there any exemptions under Turnover Tax and Presumptive Tax?
Yes. The following businesses are exempt from payment of Presumptive Tax:
- Persons registered for VAT,
- Employment income,
- Rental income,
- Limited liability companies, and
- Management and professional services.
Can a taxpayer choose not to be subject to Turnover Tax and Presumptive Tax?
Yes. A taxpayer can apply to the Commissioner in writing. In this case, the taxpayer shall be expected to prepare accounts and file returns annually under the normal income tax regime.
Are Turnover Tax and Presumptive Tax final taxes?
Yes. Persons who declare and pay Presumptive Tax and Turnover Tax will not be required to file monthly VAT returns and the annual income tax returns.
Are there penalties and interest for non-payment of Turnover Tax and Presumptive Tax?
Yes, like any other tax, a person who is liable to pay Presumptive Tax but fails to pay at the time of payment for the single business permit or the trade licence or renewal of the same shall be liable to a late payment penalty of 5% and late payment interest of 1% per month.
What are the benefits of Turnover Tax?
- 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
- Simplified filing and payment processes including payment through mobile phones.
- Reduced time for filing and paying taxes.
- The tax rate of 3% is lower relative to other rates of tax on income.
- Turnover Tax is a final tax and therefore a person is not required to file monthly VAT returns and the annual income tax return.