Turnover tax in Kenya: a simple guide for small businesses

Turnover tax (TOT) is a simplified tax for small businesses. Instead of working out profit, you pay a small percentage of your gross sales every month.

The key facts

• Rate: 1.5% of gross sales, under the Finance Act 2023.
• Who pays: resident businesses whose turnover is more than KES 1 million but not more than KES 25 million a year.
• Deadline: file and pay by the 20th of the following month on iTax. March sales are due by 20 April.
• Final tax: once paid, there is no further income tax on that business income.
• No expenses deducted: TOT is on gross sales, before any costs.

What turnover tax does not cover

• Rental income
• Management, professional or training fees
• Income already subject to final withholding tax
• Non-resident businesses

Worked example

A shop sells goods worth KES 250,000 in a month. Turnover tax is 1.5% × 250,000 = KES 3,750, due by the 20th of next month. Over a year at that level, sales are KES 3 million and turnover tax totals KES 45,000.

Use our turnover tax calculator for your own sales.

Turnover tax and VAT

VAT is a separate tax. Once your taxable sales reach KES 5 million in 12 months, you must register for VAT. Read when a business must register for VAT.

Is turnover tax right for you?

Because TOT ignores your costs, it suits businesses with healthy margins. If your costs are very high relative to sales, a tax adviser can tell you whether ordinary income tax on profit would cost less.

Sources

• KRA: Turnover Tax
• KRA: Everything about turnover tax