What is Presumptive Tax?

Presumptive Tax is a simplified tax regime for small and micro enterprises. The tax is applicable to a resident person with a turnover from business not exceeding Kshs. 5 million during a year of income. The tax is based on the value of single business permit or a trade license issued/renewed by County Government.

What is the rate for presumptive tax?

The rate is 15% of the single business permit or trading license fee paid or liable to be paid to a County Government.

How different is Presumptive Tax from Turnover Tax?

Presumptive Tax is charged at 15% of the single business permit or trade license while Turnover Tax was charged at a rate of 3% of the gross turnover. Presumptive Tax is paid once a year at the point of acquiring or renewing single business permit or trade license, Turnover Tax whose payment was made in four instalments per year. Taxpayers under the Turnover Tax regime were required to file a tax return. This is not the case with Presumptive Tax .

What is Turnover for Presumptive Tax purposes?

Turnover is the gross receipts from a business. For multiple businesses, Turnover is aggregated from all businesses of a person for which a single business permit or trading license is issued or liable to be issued by a county government.

Who is supposed to register and pay for Presumptive Tax?

It applies to a person who is issued or liable to be issued with a single business permit or trading license by the County Government. The total gross turnover from all the businesses of the person liable to pay presumptive tax should not exceed five million shillings during a year of income.

What details would be required for Presumptive Tax purposes?

The taxpayer will be required to indicate PIN, the county, sub-county, ward, business number (single business licensing number), business name, turnover and amount of single business permit fee paid during the payment registration.

What informed the shift in gears from Turnover Tax to Presumptive Tax?

Turnover Tax aimed at tapping revenue from the vibrant and robust informal sector. Despite the vibrant growth in the sector, the revenue has been declining. The Turnover Tax has not achieved its intended objectives due to the profile of the sector hence leaving many taxpayers out of the tax net.

Presumptive Tax is therefore the most appropriate tool that will ensure that all taxpayers are brought onboard as well as enhance compliance.

Who is eligible to pay Presumptive Tax?

A resident person whose gross turnover does not exceed Shs 5 million per year of income is liable to pay Presumptive tax. One is liable to pay Presumptive Tax if one is issued or liable to be issued with a single business permit or trade license.

Are there any exemptions under Presumptive Tax?

Yes. The following businesses are exempt from payment of Presumptive Tax:

  • Rental business
  • Management and Professional services
  • Income of incorporated companies

Income exempt from tax under the First Schedule of Income Tax Act and has a valid exemption certificate.

When is The Presumptive Tax due?

Presumptive Tax becomes due once a single business permit or trade license is acquired or renewed. That means that if a taxpayer acquires or renews a single business permit or trade license at a County Government office today, payment for Presumptive Tax automatically becomes due.

How is Presumptive Tax calculated?

Presumptive Tax is 15% of the single business permit or trading licence fee. For example, if the Single Business Permit or trading license is Kshs. 2,000 then Presumptive Tax payable is Kshs. 300 (15% * Kshs. 2,000).

How is payment for Presumptive Tax made?

An eligible taxpayer is expected to log on to the iTax portal using their KRA PIN and password where they will be required to generate a payment slip or an electronic slip against which payment can be made either at any of KRA partner banks or through mobile money transfer (Paybill number is 572572). The account number where the amount is to be made is the Payment Registration Number (PRN) on the electronic slip generated on iTax.

Are there penalties and interest for non-payment of Presumptive Tax?

Yes, like any other tax, a person who is liable to pay presumptive tax and who fails to pay the presumptive tax at the time of payment for the single business permit or the trade license or renewal of the same shall be liable to a late payment penalty of 5% and late payment interest of 1% per month.

Now that Presumptive Tax needs no filing of a tax return, does this mean that taxpayers under this tax regime do not need to keep records?

It is correct that taxpayers will not be required to a file tax return for Presumptive Tax. However, they will be required to keep necessary records for determination and ascertainment of turnover.

What happens if the business is no longer operational?

In the event that the business is no longer operating in the subsequent year(s) of income, the taxpayer will still be required to comply with the tax laws of filing a tax return.

What is KRA doing to ensure that Presumptive Tax lives up to its expectations?

KRA is already in extensive consultations with the County Governments to ensure a successful implementation of the Presumptive Tax. KRA has also intensified public awareness through sensitization seminars as well as through various media platforms.