KRA moved to implement the controversial three percent Turnover Tax (TOT) targeting 2.5 million businesses in the informal sector. Such businesses include kiosks, a grocery store, salon, and online business among others. A turnover tax is charged on total sales without factoring in other costs associated with running the business. The new tax takes effect from January 1, 2020.
So for every Ksh1,000, you generate in daily sales, irrespective of whether you are selling at a profit or loss, three percent if it will go to the Kenya Revenue Authority (KRA) at the end of the month as Turn Over Tax. You will also be required to keep a record of the transactions in your business so that the authority can have an easy time looking into your books.
The Turn Over Tax adds a burden to small businesses who have to part with an extra 15 percent of the permit fees to KRA as presumptive tax, so as to acquire a license from the county government. If your annual business license fee is Ksh10,000, then you will add some Ksh 1500.
“The tax rate for TOT is three percent on the gross sales and is a final tax. TOT will be filed and paid on a monthly basis. KRA, therefore, calls on all sector players to take this patriotic duty for a better Kenya. Eligible taxpayers will need to log onto iTax, add the TOT obligation, file the monthly returns and make the payments,” said Elizabeth Meyo, KRA commissioner for the domestic taxes department.
Businesses are required to pay the taxes on or before the 20th of the following month. The turnover tax would only apply to persons with a business income of less than Ksh 5 million per year. Persons registered for VAT, those with business income above Ksh 5 million per annum, employment income, rental income, limited liability companies, management, and professional services are exempted.