Frequently Asked Questions: Presumptive Tax And Turnover Tax (TOT)

Get to know more about the KRA Presumptive Tax and Turnover Tax (TOT) today. Frequently asked questions about Presumptive Tax and Turnover Tax in Kenya.

Presumptive Tax and Turnover Tax has come into enforcement this year. So if you are business owner in Kenya whose business gross sales for a year does not exceed Kshs. 5,000,000.00 then you need to start paying both Presumptive Tax and Turnover Tax (TOT) to Kenya Revenue Authority (KRA).

Today I will be answering the most asked questions about the KRA Presumptive Tax and KRA Turnover Tax (TOT). If by now you have not hear of the above two terms, then you should wake up from your reverie, it’s 2020 the year when eligible taxpayers who won and run SME Businesses in Kenya start paying the Presumptive Tax and Turnover Tax.

READ ALSO: How To Add Sole Proprietorship Business On KRA iTax Portal

For the Purposes of making sure you are up to date will all Kenya Revenue Authority (KRA) public notices, you can check out the Presumptive Tax Public Notice and the Turnover Tax (TOT) Public Notice on the KRA Website. Also, If you need the basic understanding of these new tax regimes for small businesses, you can read our two articles on The Complete Beginner’s Guide To KRA Presumptive Tax In Kenya and The Complete Beginner’s Guide To KRA Turnover Tax (TOT) In Kenya.

I have gotten a ton of questions in my email from majority of Kenyans this past week about Presumptive Tax and Turnover Tax (TOT) in Kenya. I responded to most of the questions about the two tax categories. So, to answer all the questions that most Kenyans will be asking themselves each passing aday, I have put together the best resource covering the frequently asked questions about Presumptive Tax and the frequently asked questions about Turnover Tax (TOT).

Most people are interchanging these two taxes categories. You need to take note that each is separate from the other. I am going to group these into; Frequently Asked Questions About Presumptive Tax and Frequently Asked Questions About Turnover Tax (TOT).

Frequently Asked Questions About Presumptive Tax

What is Presumptive Tax?

The first question that most Kenyans have in their minds is what is this Presumptive Tax? Presumptive Tax is an advance tax that is payable by small businesses (SMEs) whose gross sales does not exceed or is expected not to exceed Kshs. 5,000,000.00 per year. This is in accordance with Finance Act, 2018. Presumptive Tax applies where the turnover from business is less than shillings five million (5,000,000.00) per annum. So, if you own and run a business in Kenya whose gross sales per year is less that Kshs. 5 million, then you are definitely eligible to start paying Presumptive Tax.

Who Should Pay Presumptive Tax?

Who then is supposed to be paying this tax? Well, actually we can group the taxpayers who are eligible to be paying Presumptive Tax into two. The first category comprises of those taxpayers whose gross sales turnover from their business does not exceed Kshs. 5 million during a year and those taxpayers who are issued or are liable to be issued with a Business Permit or Trade License by a County Government.

Where Is Presumptive Tax Charged?

Where is this Tax charged on my business or? Well this tax is charged and paid on your Business County Government Permit or Trade Licence. The Presumptive Tax is paid from your Permit or Business Licence.

Who Is Exempted From Payment of Presumptive Tax?

Is this tax for everyone or are there a group of taxpayers who will not be paying Presumptive Tax. The answer to this question is Yes, there is a group of taxpayers who are exempted from paying this tax. Those exempted from Presumptive Tax includes; a person whose income is exempt from tax under the First Schedule of Income Tax Act and has a valid exemption certificate,  a person who would otherwise pay tax under this regime but elects by notice in writing to the Commissioner not to be subjected to the Presumptive Tax, a person whose Gross Sales Turnover from business exceeds Kshs. 5,000,000.00 in a given year, Management and Professional services, Rental Business and Incorporated Companies.

What Is The Rate for Presumptive Tax?

How much Presumptive Tax will my business be charged or need to pay and at what tax rate?  The rate of Presumptive Tax shall be amount equal to 15% of the amount payable for a Business Permit or trade License issued by a County Government. The amount of tax that you will charged is 15% of the amount you paid for your Business Permit or Trade Licence.

When Is Presumptive Tax Due?

When am I supposed to pay for the Presumptive Tax? The due date for payment of the tax shall be at the time of payment for the Business Permit or Trade Licence or renewal of the same. There is no specific or fixed date that you need to pay Presumptive Tax. All you need to know is that you will be paying this tax as soon as you renew your Business Permit or Trade Licence or when you are applying for a new Business Permit or Trade Licence in your County.

How Do I Pay Presumptive Tax?

How do I get to pay this Presumptive Tax? Well, after you have generated the Presumptive Tax Payment Slip, you can pay the tax using KRA Paybill Number 572572 or even at the KRA Partner banks in Kenya.

What Is The Penalty For Late Payment of Presumptive Tax?

Let’s say I dont pay Presumptive Tax, what is the penalty that will be imposed on me by KRA? The penalty is 5% of the tax due and a late payment of interest 1% per month as outlined in the Tax Procedures Act, 2015.

The above are the most frequently asked questions about the KRA Presumptive Tax in Kenya. If you have any question about Presumptive Tax that you think you need an answer on, you can send me an email with the subject line “Presumptive Tax” to [email protected] or drop the Presumptive Tax that you need quick answer to on our WhatsApp Business number +254 723 737 740.

READ ALSO: The Complete Beginner’s Guide To KRA Turnover Tax (TOT) In Kenya

Now that we have addressed the most burning questions on taxpayers minds about Presumptive Tax, we need to look at the other category that is the Turnover Tax (TOT).

Frequently Asked Questions About Turnover Tax (TOT)

What is Turnover Tax (TOT)?

What is this Turnover Tax (TOT)? Turnover Tax (TOT) is tax payable by small businesses whos gross sales does not exceed or is not expected to exceed Kshs. 5,000,000.00 per year (annum). The tax is payable on a monthly basis at the rate of 3% of the gross sales of the business amd is paid on or before the 20th day of the following month. Turnover Tax is charged on the monthly Gross Sales for the business. 

Who Should Pay Turnover Tax (TOT)? 

Who is supposed to be paying Turnover Tax (TOT)? Turnover Tax (TOT) is paid by business owners who gross sales for a year is less than Kshs. 5,000,000.00 Any person who owns and runs a business in Kenya whose gross sales is less than Kshs. 5 million per year is eligible to start paying Turnover Tax (TOT). 

Where Is Turnover Tax (TOT) Charged?

Where is this tax charged? Turnover Tax (TOT) is charged on your monthly gross sales. Basically Turnover Tax (TOT) is charged on the sales that you business generates for a given specific month. 

Who Is Exempted From Payment of Turnover Tax (TOT)?

Who is exempted from paying Turnover Tax (TOT)? Turnover Tax does not apply to persons registered for Value Added Tax (VAT), persons with business income of more than Kshs. 5,000,000.00 per year, persons with employment income, persons with rental income, limited liabilities companies, management and professional services. 

What Is The Rate for Turnover Tax (TOT)?

What rate of the Turnover Tax (TOT) will be charged on my business gross sales per month? The Turnover Tax (TOT) tax rate is 3% on the gross sales/turnover and is a final tax. That simply means you need to pay a Turnover Tax of 3% of the sales that you have done for a given month. 

When Is Turnover Tax (TOT) Due?

When am I supposed to be paying the Turnover Tax (TOT) for my business? Turnover Tax (TOT) is due on or before the 20th day of the following month. An example, the Turnover Tax for the month of January 2020 will be due on or before 20th February 2020. 

How Do I Pay Turnover Tax (TOT)?

How will I be paying the Turnover Tax for my business? Well, after you have generated the Turnover Tax (TOT) Tax Payment Slip for a specific month e.g January 2020, you can pay the tax using KRA Paybill Number 572572 or even at the KRA Partner banks in Kenya.

What Is The Penalty For Late Turnover Tax (TOT)?

What happens when I fail to file and pay for Turnover Tax for my business? If you make no sales in a particular month, you are required to file a NIL return to avoid being penalized. TOT late filing penalty is Ksh. 5,000 per month. Late payment penalty is 5% of the tax due. Interest on unpaid tax is 1% of the tax due. 

READ ALSO: The Complete Beginner’s Guide To KRA Presumptive Tax In Kenya

The above sums up the most frequently asked questions by taxpayers on Turnover Tax (TOT). If you have any question about Turnover Tax (TOT) that you think you need an answer on, you can send me an email with the subject line “Turnover Tax (TOT)” to [email protected] or drop the Turnover Tax (TOT) that you need quick answer to on our WhatsApp Business number +254 723 737 740.