KRA Adopts Presumptive Tax System For Small Businesses

Kenya Revenue Authority (KRA) has announced adoption of presumptive tax system for business entities with a turnover of less that Ksh5 million as from January 2019.

In a statement the taxman says that the entities will pay 15 per cent of the business permit fee or license. at the time of payment for business permit fee or trade license.

Eligible taxpayers will have to log into iTax to make payment for presumptive tax. The taxpayers shall be required to generate a Payment Generation Number (PRN) on iTax under Presumptive Tax Payment, after which they can pay through MPesa paybill number 572572 or any other partner bank.

The tax does not apply to persons engaged in management or professional services, rental businesses and incorporated companies.

During the 2018-2019 Kenya National budget speech on June 14, 2018, the Cabinet Secretary (CS) to the National Treasury Henry Rotich proposed introduction of Presumptive tax to replace Turnover tax (TOT).

TOT was introduced in Kenya in January 2008. However, due to the prevailing political chaos at that time and numerous other extraneous factors, the uptake of the tax system has not been that successful.

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Under TOT, taxpayers are required to maintain minimal tax records and books. Submissions of tax returns and remittance of the tax are on a quarterly basis in simplified formats.

Following change of the system, KRA will conduct a sensitisation exercise across all counties as shown in the chart below.