Running a small business in Kenya comes with tax responsibilities. One of the simplest regimes is Turnover Tax (TOT).
KRA charges TOT on the gross sales of eligible businesses. Unlike income tax, you cannot deduct business expenses when calculating TOT.
Therefore, rent, salaries, electricity and other costs do not reduce your taxable turnover.
Who Qualifies for Turnover Tax?
KRA says TOT applies to resident individuals and companies with annual gross turnover above KSh1 million. The turnover must not exceed KSh25 million in a year.
However, eligible taxpayers can choose to opt out of TOT by notifying the Commissioner in writing. Certain income is also excluded from the regime.
These include rental income, management and professional fees, training fees and income subject to final withholding tax. TOT also does not apply to non-resident taxpayers.
What Is the Current TOT Rate?
The current KRA Turnover Tax (TOT) rate is 1.5% of gross sales for eligible businesses.
| Monthly Gross Sales | TOT Rate | Turnover Tax Payable |
|---|---|---|
| KSh180,000 | 1.5% | KSh2,700 |
| KSh500,000 | 1.5% | KSh7,500 |
| KSh1,000,000 | 1.5% | KSh15,000 |
| KSh1,500,000 | 1.5% | KSh22,500 |
How Is TOT Calculated?
The calculation is straightforward:
Gross Sales × 1.5% = TOT Payable
For example:
KSh180,000 × 1.5% = KSh2,700
Similarly:
KSh1,500,000 × 1.5% = KSh22,500
Important: TOT is calculated on gross sales, meaning you do not deduct business expenses before applying the 1.5% rate.
When Should You File and Pay?
TOT is filed and paid monthly. The deadline is the 20th day of the following month. For example, January TOT should be filed and paid by February 20.
KRA allows taxpayers to file through the iTax platform. You can also use the KRA M-Service App for filing and payment.
How to File TOT on iTax
- First, log into the KRA iTax portal.
- Next, select Returns and choose File Return.
- Select Turnover Tax and download the relevant return.
- Enter your gross sales for the tax period.
- Validate the return before generating the upload file.
- Then upload and submit the completed return.
- After filing, proceed to the payment section.
- Generate a payment slip and complete payment through the available KRA payment channels.
What Happens If You File Late?
KRA imposes a KSh1,000 penalty for late filing of a TOT return. Late payment attracts a 5% penalty on the tax due.
KRA also charges 1% interest on unpaid tax. Therefore, small businesses should track their monthly sales and deadlines carefully.
What About VAT?
TOT and VAT can apply to the same business where the relevant conditions are met. KRA states that a TOT taxpayer dealing in taxable supplies with turnover of KSh5 million or more must also register for VAT.
Therefore, reaching the VAT threshold creates an additional compliance obligation.
Kenyan Small Businesses
TOT simplifies tax compliance for many small businesses. However, remember that it is based on gross sales, not profit.
A business with high operating costs can therefore still owe TOT. Keeping accurate daily sales and purchase records remains essential.
Most importantly, traders should confirm their current tax obligations directly with KRA before filing. That can help prevent costly mistakes, penalties and interest.
