Taxation Made Simpler - Turnover Tax and Presumptive Tax

PUBLIC NOTICES 07/02/2020

All Kenyans will now be paying their fair share of taxes. Following the recent amendments to the law, the government has introduced a simpler tax regime for Micro and Small Enterprises (MSEs) where they will be paying taxes through simplified processes including; mobile phone payment platforms. Under the simplified regime, taxpayers will not be required to prepare complex records of account. The eligible taxpayers will only be required to keep a daily gross sales record. Eligible taxpayers are reminded that the January Turnover Tax (TOT) payment is due on 20th February, 2020.  KRA has been consulting with concerned stakeholders to facilitate them to register and pay the taxes due.

Understanding Turnover Tax and Presumptive Tax

What is Turnover Tax (TOT)?

Turnover Tax (TOT) is a tax payable by small businesses whose gross sales does not exceed or is not expected to exceed Kshs. 5 million per year. It is payable on monthly basis at the rate of 3% on the gross sales by the 20th day of the following month. Turnover Tax came into effect on 1st January 2020.

What are the benefits of Turnover Tax?

There are many benefits of Turnover Tax including;

• Reduced expenses since there is no need for accountants.

• Simplified filing and payment processes including payment through mobile phones.

• The taxpayers are not required to keep complex records, they are only required to keep a daily gross sales record.

• Reduced time for filing and paying taxes.

• There is no requirement to investment in computers and electronic tax registers.

• 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.

What is Presumptive Tax (PT)?

Presumptive Tax is an advance tax payable by small businesses whose gross sales does not exceed or is not expected to exceed Kshs. 5 million per year. It is paid by a person when acquiring or renewing a business permit or a trade license at the county government. The applicable rate of Presumptive Tax is 15% of the business permit fee or license payable.

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) and therefore there is no double taxation.

Who is excluded from payment of Turnover Tax and Presumptive Tax?

Turnover Tax and Presumptive Tax does not apply to:

• 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?

A taxpayer can choose not to be subject to Turnover Tax and Presumptive Tax by applying to the Commissioner in writing in which 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.

How to register for Turnover Tax and Presumptive Tax?

Taxpayers shall register online through the iTax system or through their mobile phones.

How to file and pay for Turnover Tax through the iTax system

Turnover Tax returns are filed on or before the 20th day of the following month. For example the turnover tax for January 2020 is payable on or before the 20th of February 2020.

Login to www.itax.go.ke, select “file turnover tax return” under the returns menu, complete the return and submit. After filing the return, go to the payment menu, select “payment”, declare the amount filed, and generate the payment slip. Follow the steps in the payment slip to make the payment. More information relating to registration for Turnover Tax and Presumptive Tax may be obtained from our website: www.kra.go.ke.

For clarification please contact the Contact Centre on Tel. Number: 020 4 999 999; 0711 099 999 or Email: callcentre@kra.go.ke. You may also visit the nearest KRA Office or Huduma Centre.

Commissioner for Domestic Taxes