Tax Alert on Presumptive Tax
Kenya Revenue Authority (KRA) has issued a public notice on 6th January 2020 on the implementation of Turnover Tax (TOT) and Presumptive Tax effective from 1st January 2020.
TOT was re-introduced through the Finance Act, 2019 that had previously been removed by the Finance Act 2018 and replaced by presumptive tax. The TOT is meant to simplify tax compliance by small and medium size businesses in the informal sector where the tax payable is a calculated on the total sales without deducting expenses.
TOT shall be payable on a monthly basis at the rate of 3% on gross sales by any resident person whose turnover from business does not exceed KES 5,000,000 during any year of income. The person liable to pay TOT shall file a monthly return and pay the tax due on or before the 20th of the month following the end of the tax period (a calendar month). For example, the TOT for the month of January 2020 is due for filing and payment on 20th February 2020 and so on.
TOT is a final tax and the taxpayer will not be required to pay any further income tax on its business income.
TOT shall not apply to:
- persons registered for VAT;
- persons with business income of KES 5,000,000 or more;
- rental income;
- management or professional or training fees;
- income of limited liability companies; and
- employment income.
TOT shall be paid online and eligible taxpayers should log onto iTax and add the TOT obligation under their profile and file the monthly returns and make payment.
Presumptive Tax, introduced in the Finance Act, 2018 that was meant to replace TOT has been retained. Presumptive Tax is payable at the rate of 15% of the single business permit fee or license fee payable for persons acquiring or renewing business permit or license at the County Government.
Presumptive Tax will only apply where the turnover from business is less than KES 5,000,000 per annum. The Presumptive Tax paid will be offset against the TOT payable.
Presumptive Tax is also payable online and eligible taxpayers should log onto iTax and generate a Payment Registration Number (PRN) under Presumptive Tax Payment. Presumptive Tax should be paid at the time of payment for business permit fee or trade license.
How we can Assist
CM Advocates has a fully-fledged tax law advisory business unit that offers a vast range of tax advisory services. Our highly qualified and experienced personnel will assist with your tax matters and ensure that your business is tax compliant.
We will assist in the calculation of the TOT payable and the preparing and filing of the TOT returns and payment on a monthly basis as well as payment of the Presumptive Tax.
Kindly get in touch with us for any clarifications and assistance on the above.