This is a step-by-step instruction manual on how to file a Kenyan turnover tax return (TOT) as recommended by the Kenya Revenue Authority (KRA).
What is Turnover Tax?
According to Section 12(c) of the Income Tax Act, a tax called turnover tax is levied on the gross sales of a company.
First introduced by the Finance Act of 2006, TOT was later superseded by the Presumptive Income Tax and reintroduced by the Finance Act of 2018.
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Who should pay turnover Tax?
Residents must pay turnover tax if their annual gross business revenue exceeds Kshs 1,000,000 but falls within or is not anticipated to reach Kshs 50,000,000.
Who should not pay turnover tax?
- Individuals with annual business income between Kshs 1,000,000 and Kshs 50,000,000.
- Rental revenue.
- Fees for management, professionals, and instruction.
- Anything whose final withholding tax is governed by the Income Tax Act.
Monthly TOT reports and payments are required. The deadline is the 20th of the next month, or before.
Turnover Tax Rate
The rate of turnover tax is 1% of gross monthly sales.
Costs aren’t tax deductible.
Actually, this is a last-minute tax.
Penalty for failure to comply
The monthly TOT late filing penalty is Kshs 1,000.
A late payment fee of 5% of the tax is assessed.
Unpaid tax interest is 1% of the principal amount owed.
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How To File Turnover Tax Return
1. Navigate to https://itax.kra.go.ke/KRA-Portal/ and log in.
2. Choose file return from the return option, then choose turnover tax.
3. Download the return in Excel.
4. Finish the return and send it in.
5. Select the payment option after submitting the return.
6. Click Payment, followed by Amount Due, to create a payment slip.
7. Pay the invoice through Mpesa or a partner bank.
Note: It is recommended that eligible taxpayers sign in to iTax, add TOT obligations, submit monthly returns, and make payments.
A taxpayer who chooses not to be subject to TOT taxation despite having a turnover below the applicable threshold is presumed to have informed the Commissioner of this choice by failing to register for TOT.
