How to File and Pay Turnover Tax in Kenya

he government through the Kenya Revenue Authority collect revenue through Taxes. The taxes are mandatory as all taxpayers are required to pay a fair share for development. One of the taxes that taxpayers have to pay is the Turnover Tax.

In this post we highlight more about the Turnover Tax:

  • The TOT Rate
  • The business that is subject to TOT
  • How to compute and Pay TOT
  • Penalties for non-compliance.

What’s is the Turnover Tax

Turnover tax is a tax payable by Micro and Small Enterprises (MSME’s) taxpayers running a business in Kenya to the Kenya Revenue Authority. Turnover Tax was present previously but was reintroduced effective of the Enactment of the Finance Act 2019.  The Tax became payable effective Jan 2020.

“The Finance Bill proposes to re-introduce turnover tax at the rate of three per cent of the gross receipts of the business payable monthly and is to be paid by any resident person whose gross sales do not exceed Sh5 million annually while the presumptive tax will be maintained as a minimum tax,”

Turnover Tax Rate

Turnover Tax is charged at 3% of the Gross Revenue from a business operation. The tax is charged on the revenue (sales) without netting off the expenses.

More information on the computation of the turnover Tax is illustrated below on the Computations Section of this Post.

Income that is subject to Turnover Tax

Turnover Tax (TOT) is payable by any resident person whose turnover from business does not exceed or is not expected to exceed Kshs 5,000,000 during any year of income.

This means that all businesses not exempted from the Turnover Tax regime should pay the Tax regardless of their nature of operations.

Exemption for Turnover Tax

Not all taxpayers are subject to filing and Payment of the Turnover Tax. Taxpayers that are exempted from paying the turnover Tax include:

  1. Persons registered for VAT
  2. Persons with business income of Kshs 5,000,000 and above,
  3. Employment Income,
  4. Rental Income,
  5. Limited Liability Companies,
  6. Management and Professional Services among others.
  7. Income Exempted according to the Income Tax Act

The taxpayers are exempted from paying Turnover Tax are subject to other Tax Regimes such as VAT for those whose Revenue is above 5 million, PAYE for Employment income, Rental Income Tax for Rental Property and Corporate Tax for Companies.

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