Turnover tax (TOT) Compliance guide

The 2019 Finance Act has re-introduced the turnover tax at the rate of 3% of the gross income. This tax was repealed by the Finance Act, 2018 and is applicable to any resident person whose annual turnover is below Kshs.5 million. Turnover tax is now a monthly obligation payable on or before the 20^th day of the following month.

Resident persons liable to pay turnover tax are also required to pay a presumptive tax at the rate of 15% of the amount payable for a business permit or trading license issued by the county government.

The informal sector has been the main key to economic development in many nations around the world. It is on this basis that the Government of Kenya has introduced turnover on small-scale traders commonly referred to as Juakali sectors. The whole principle around introducing the tax is spreading the tax burden across many Kenyans as possible.

The general rule in taxation is that the compliance process has been made simple and easy to administer. While the compliance process of filing and submission of turnover returns on i-Tax may be cumbersome for most of the informal business owners who are not tech-savvy, compliance can be achieved in the following ways;

Start by acknowledging that your business is subject to the tax if it makes less than 5,000,000 per annum on gross sales. There is no need to wait for the long arm of the taxman to show up at your doorstep for failing to comply. KRA is working with the local county governments to know how many businesses have been given licenses. This will be used to track how many businesses are in operation.

The taxpayers that will be eligible for the Turnover Tax (TOT) should keep daily gross sales records that will help in the computation of the TOT every month.

If doing all of this on your own proves difficult, you can hire the services of an accountant to be submitting the taxes for you.