Turnover tax in Kenya: who pays it and whether it suits you
Turnover tax is simple to file, but it is charged on sales, not profit. Know the bands, the monthly deadline and when the normal regime costs less.
By HMG Editorial Team · Published
What turnover tax is
Turnover tax (TOT) is a simplified tax for smaller resident businesses. At the time of writing it applies where gross annual turnover is more than KES 1 million and does not exceed KES 25 million, at 1.5% of gross sales. Finance Acts change rates and bands, so confirm the current figures before you file.
Some income sits outside turnover tax, including employment income, rental income, management, professional and training fees, and income already subject to final withholding tax.
Filing is monthly
TOT returns are filed and paid on iTax by the 20th day of the month after the sales were made. A month with no sales still needs a nil return, and missed months add up to penalties that can block a Tax Compliance Certificate.
Record keeping still matters. Keep every sale, issue proper invoices through eTIMS, and keep your purchase records, because they support your figures if KRA asks questions.
Simple is not always cheaper
Because TOT is charged on sales, expenses are not deducted. A business with thin margins or a loss can pay more under turnover tax than it would under the normal income tax regime, which taxes profit.
A business can elect to move to the normal regime by notifying KRA. Before choosing, compare both for a typical year using your actual margins, and factor in the extra bookkeeping the normal regime needs.
This article is general guidance only and is not individual tax, legal or accounting advice. Rules change; confirm your position with an HMG consultant before acting.
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