Friday, January 24, 2020
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MSMEs to start paying 3% tax on turnover as law takes effect

Kenya’s small and medium businesses to start paying a three per cent tax on their sales beginning January 1, 2020 following the re-introduction of the levy, contained in The Finance Act 2019, which was signed into law by President Uhuru Kenyatta in November 2019.

This means, businesses with a turnover of Ksh 5 million and below will pay the Kenya Revenue Authority (KRA) three per cent of their sales in a bid to boost tax collections.

The taxman has not been meeting revenue collection targets, this move is set to raise tax collections from these traders.

In 2018, National Treasury had replaced the sales levy with a presumptive tax at the rate of 15 percent of the single business permit fee issued by county governments when renewing their permits. This move was to be used by KRA to collect additional data on small traders, setting the stage for the return of the turnover tax.

KRA says the presumptive tax will remain an advance tax that will be deducted against the turnover tax.

KRA’s analysis ahead of introduction of presumptive tax in 2018 indicated that some 1.56 million taxpayers with single business permits had not registered under the turnover tax regime.

KRA hopes to boost collections and hit the revised targets as set out by the Treasury.

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