Turnover Tax
Turnover Tax is a tax that is applicable to small businesses in Kenya. In this comprehensive guide, we will explain everything you need to know about Turnover Tax in Kenya, including who is eligible for it, how it is calculated, how and when it should be paid, exemptions and penalties. By the end of this guide, you will have a clear understanding of Turnover Tax and its implications for your business.
1. What is Turnover Tax & How is it Different from Other Taxes in Kenya?
Turnover Tax is a tax that is imposed on small businesses in Kenya. It is different from other taxes in Kenya because it applies to businesses whose annual turnover is more than KES 1 million but does not exceed Ksh. 25 million.
The rate of the tax is 3% on monthly gross sales. The re-introduction of the turnover tax is geared towards ensuring payment of taxes by the informal sector.
The main purpose of this tax is to simplify the taxation process for small business owners and make it easier for them to comply with the law.
2. Who Should Pay Turnover Tax and When?
Turnover tax is a tax payable by any resident person whose annual gross sales turnover from business is more than Ksh. 1,000,000 million shillings but does not exceed or is not expected to exceed Ksh. 50,000,000 million shillings during any year of income.
A person who would otherwise be liable to pay turnover tax as per the above gross sales threshold, may by notice request in writing Kenya Revenue Authority (KRA) to be subject to the Turnover Tax.
Turn over tax is considered a final tax and is not subject to any further taxation.
Turnover tax does not apply to the following income:-
- Rental Income.
- Management or Professional or Training Fees.
- Any income subject to withholding tax.
3. How to Register for Turnover Tax
If you are a small business owner in Kenya, registering for Turnover Tax can be a great way to simplify your tax obligations. Turnover Tax is a simplified tax system designed for small businesses with an annual turnover of Ksh.1, 000,000 million or less.
To register for Turnover Tax, you will need to follow some simple steps. The process can be completed online through the Kenya Revenue Authority (KRA) iTax platform or by visiting your nearest Kenya Revenue Authority (KRA) branch.
4. What are the Penalties for Late Payment or Non-Payment of Turnover Taxes?
A person subject to turnover tax should submit a return and pay the tax due on or before the 20th day of the month following the end of the tax period (calendar month).
Turn over Tax late filing payment is charged Kshs. 1,000 per month and a late payment attracts a penalty of 5% of the tax due whereas interest on unpaid tax attracts a penalty of 1% of the principal tax due.
A person subject to turnover tax is required to keep records necessary for the determination and ascertainment of the tax.
5. Conclusion
It is important for businesses to understand their obligations regarding turnover tax and payment procedures in order to avoid penalties and maintain compliance with tax laws regulations.
Seeking professional advice from an accountant or tax expert can be helpful in navigating these requirements.
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