Turnover Tax in Kenya: What is Turnover Tax (TOT)?
Turnover Tax is a type of tax that is payable by small businesses with total sales that does not exceed or is not expected to exceed Kshs 5,000,000 per year.
Who is supposed to pay Turnover Tax?
TOT is paid by an individual who has a business with income less than 5 million. If you have a business that meet the above criteria you are supposed to pay TOT. You should not pay TOT if
- You already pay VAT
- You only have employment income,
- You only have rental income and you pay the necessarily tax
- You have a registered company (ltd)
- You engage in Management and professional services
What is the rate of Turnover Tax in Kenya?
The rate of TOT is 3 percent on total sales. For instance, if in January 2020 your business had total sales of 20,000. The total TOT payable is 600
3% x 20,000 =600
Note that you are not expected to deduct any expenses.
When is TOT due/payable?
This tax is supposed to be paid by 20th day of the following month. For instance the above January 2020 TOT of 600 should be paid by 20the February 2020
What are the advantages of Turnover Tax to a business?
- It is simple to calculate and file hence no need to employ an accountant
- It requires no complex record and information
- Does not require extra machinery like ETR
- It is a lower rate compared to other form of taxes
- It is a final tax therefore you will not need to file extra annual returns.
Should I pay TOT if I have paid presumptive tax?
Presumptive tax is paid by business when renewing the license at the county government. The current rate is 15 % of the business permit fee. If you have paid this tax you can deduct the amount paid in the TOT tax payable. For instance if the license fee is 30,000 the presumptive tax payable is
15% x 30,000= 4,500
If you have paid the above tax when renewing or applying for license you can deduct it from TOT payable in January 2020. Assume we continue with our Illustration 1 where TOT payable was 600, it would mean that in January 2020 no TOT is payable as (600-4500= -3900). The balance of Kshs 3900 of paid presumptive tax can still be deducted in the subsequent months
Is it a must I register with Turnover Tax and Presumptive tax?
If you choose not to register for TOT and Presumptive tax you can write a letter to the Commissioner expressing you decision. Once you write the letter you are expected to prepare accounts and file annual returns in the normal tax procedures
How to register for Turnover Tax
- Login to www.itax.go.ke
- On the menu bar, next to Home, select registration
- On the registration select Amend PIN Details, then choose mode of amendment ( online form or upload form) then click next
- Choose to amend: Basic information
- Right below residential details, there is question asking if you want to register with TOT.
- Select yes
- Click on the obligation details which is next to basic information and tick the check box on the TOT.
Once you choose TOT you will note that the tick in the check box under Income tax Resident will disappear. This happens because TOT is a final tax and once you have registered for it you will not need to file your annual returns.
Once you submit the amendment you will get a task number/Acknowledgement notice which will also be forwarded in the email you registered on i-Tax. It may take few days for the amendment to be approved. Once it is approved you will get a notification in your email and an amended PIN having the new obligation will be attached. Note that the date of registration appearing on the PIN is the date which the obligation was approved and not the date in which you made the application