What is turnover tax and how is it different from Presumptive Tax?
Answer: Turnover Tax (ToT) is a monthly tax levied on business enterprises with an annual turnover of less than Ksh.5 million. ToT is charged at a rate of three per cent of the monthly gross sales. Presumptive tax on the hand is an advance tax charged at a rate of 15 per cent on the single business permit or trade licence fee. It also applies to business enterprises with an annual turnover of less than Ksh.5 million. Presumptive tax is payable at the point of renewal or application for a single business permit or trade licence.
Q2. Does this not amount to double taxation?
Answer: As mentioned above, Presumptive Tax is an advance tax, which in this case is offset against ToT payable. Assuming that your single business permit fee payable to the county government at the beginning of the year is Ksh. 20,000. The presumptive tax payable to KRA in this case is 15 per cent of Ksh. 20,000 which translates to Ksh. 3,000. To make the payment, you have to log into the iTax platform and generate a payment slip under the “Payments” tab. Use the payment registration number on the slip as the account number when making the payment.
Let us now assume that your gross turnover in January is Ksh. 300,000. Three per cent of this is Ksh. 9,000. This will be your ToT liability. Unlike presumptive tax, you need to file a ToT return before making payment. To get the ToT return, login to your iTax account and download the return under the “Returns” tab.
Now offset the Presumptive Tax paid at the beginning of January. From our example, the Presumptive Tax paid was Ksh. 3,000. The ToT liability at hand is Ksh. 9,000. Offsetting the Presumptive Tax paid against the ToT payable will translate to subtracting Presumptive Tax paid from the ToT liability hence, Ksh. 9,000 – Ksh. 3,000 which gives us a ToT liability of Ksh. 6,000.
It is important to note that the Presumptive Tax paid can only be offset once in the year of income. However, where the presumptive tax paid is more than the ToT liability, the balance will be offset in the subsequent month.
Q3. When are the due dates for both ToT and presumptive tax?
Answer: ToT is due for filing and payment on or before the 20th day of the following month. For example, ToT for January is due on or before 20th February. Presumptive Tax on the other hand is due upon renewal or application for a single business permit or a trade licence.
Q4. How does one file and pay for ToT?
Answer: Just like in the case of most taxes, a return precedes a payment. A tax payment is made against a return filed. To file for ToT, log in to your iTax account at https://itax.kra.go.ke, go to the “Returns” tab, select the Turnover Tax Return, fill it out accordingly and submit. After filing your return, now go to the “Payments” tab on
iTax, generate a payment slip for the ToT liability and use the payment registration number (PRN) on the slip to make your payment.
Q5. Who is exempted from ToT and Presumptive Tax?
Answer: The following is a list of cases exempted from ToT and Presumptive Tax:
A case where the gross annual turnover is more than Ksh. 5 million
· Provision of management/consultancy or professional services
· Limited liability companies
· Rental income
Q6. Will one be required to file an annual tax return for ToT and Presumptive Tax?
Answer: No. ToT and Presumptive Tax are final taxes. Once filed monthly, in the case of ToT, which is a monthly tax, a taxpayer will not be required to declare ToT again.
Q7. Can a taxpayer who qualifies to be under ToT and Presumptive Tax regimes opt not to be in the two regimes?
Answer: Yes. A taxpayer can opt out of the two regimes by writing to the Commissioner. Such a taxpayer will automatically be placed under the normal annual income regime where they will be required to keep books of accounts and file returns annually.
Q8. Compared to the annual income tax regime, what are the benefits of the ToT regime?
· The ToT regime is much simpler than the annual income tax regime and requires minimal bookkeeping
· No requirement to invest in computers and tax registers
· The three per cent rate is way lower compared to other tax rates
· ToT is a final tax and does not require to be declared again in the year