Turnover tax (TOT) in Kenya is tax on the income of small businesses with income less than kshs 5,000,000 turnover per year and more than kshs 500,000 turnover per year.
However, TOT is not applicable to all persons with less than kshs 5,000,000 turnover per year.
There are some business that though they have turnover of less than kshs 5,000,000, they are not taxed under TOT. Examples are services suppliers such as consultancies, training services, etc. This tax system was introduced effective 1st January 2008. The tax system was introduced to enable taxpayers with low annual turnover comply with the requirements of Income Tax Act Cap 470 in Kenya.
Reasons for introducing the tax
There were many reasons for introducing TOT. However, the main reason for introducing the tax system was simplify tax business for the taxpayers with low turnovers. The simplicity introduced by turnover tax was in:
Income Exempted from TOT
The following incomes are exempted from TOT.
Business Subject to TOT
There are very many businesses that are subject to TOT. The following are some of the businesses that are subject to TOT.
TOT is on the gross sales for specified tax period.
The tax period for turnover tax is three month. The tax is accounted for on quarterly basis.
Under TOT, there are no expenses allowed. The gross sales are subjected to the tax rate. Capital expenditures are also not allowed.
The tax rate under TOT in Kenya is 3 % of gross amount.
TOT Due Dates
TOT is paid on a quarterly basis (3 months) starting 1st January each year. Tax is paid by 20th of month following end of the quarter by the registered taxpayer to KRA.
Quarterly tax returns are made by 20th of month following end of quarter. There are no annual tax returns.
Tax Records to Maintain
There are various records that the taxpayers is expected to maintain during their business operations. The following are some of the records:
Is TOT a Final Tax?
Yes. TOT is a final tax.