This article introduces you to the presumptive tax in Kenya. We shall start by looking at the presumptive tax meaning.
Presumptive tax meaning
Presumptive Tax is nothing else but a simplified tax payable by small businesses and micro enterprises, mostly those who are not captured in other tax regimes such as VAT.
The tax is levied to a resident individual whose business turnover (sales) doesn’t go beyond Kshs 5 million annually.
But the tax is not computed based on the sales as it is the case with turnover tax…
Here the amount is calculated on the amount you pay to your County Government as your single business permit/trade license fee per year.
How much is the rate for presumptive tax in Kenya?
The presumptive rate is 15% of the trading license or single business permit charge you pay to your local County Government.
Therefore, all you have to do to arrive at the due presumptive tax is take 15 percent of the amount you have paid (or regularly pay) for your Single Business permit/trading license fees.
For example, if your single business permit value or trading license fee is kshs.2,000.00, then your payable Presumptive Tax is 15%Xshs.2,000.00= shs.300.00
When does the presumptive tax become due?
The tax falls due on the date you pay for the trade license/business permit or on the renewal date meaning that if you acquire or renew your single business permit/trade license today, the Presumptive Tax will automatically become due.
What details are you required to have for Presumptive Tax eligibility?
The taxpayer shall be required to indicate his/her KRA PIN number, county, sub county, resident ward, business registration number (single business licensing no.), registered business name, annual turnover, and the amount you paid for the single business permit.
Payment of Presumptive Tax: How to Pay
To pay this tax, taxpayers should first register on KRA iTax.
Follow the following steps after registering to make the payment.
- Go to https://itax.kra.go.keand click log using your KRA PIN plus the Password.
- Click on the Payments Menu up there,then select Payment Registration.
- Under applicant type, select taxpayer/agent as applicable.
- Under Tax Head, SelectIncome Tax then Presumptive Tax under Tax Sub Head. The Payment Type will self-populate as Self-Assessment Tax.
- Now Click on Payment Registration and type your Presumptive Tax details such as Year, County, Ward, Sub County, Business License Reg. No (from your license), Business Name, Single Business Permit Payable Value, Yearly Turnover, and select the Add
- Where you have paid for several business licenses with either one county or several different counties, you will have to enter the above details once again and select the add button after each entry.
- Now choose the Mode of Payment eg. Bank/MPESA
- Finally, click Submit and then click on the provided link to download your presumptive tax Payment Slip.
- Print 2 copies of the slip and proceed to your bank to deposit the money.
- You can obviously pay by MPESA using the KRA Paybill Number 572572. Your account number is the payment slip registration number (look for it below the payment registration date). You can as well follow the mobile payment instructions outlined in the payment slip’s M-payment section).
What is the applicable Penalty for late remission of Presumptive Tax?
You’re penalized 5% of the amount due and a 1% late payment interest per month you have delayed the payment.
What is the relationship between Presumptive Tax in Kenya and Turnover Tax?
Having looked at the presumptive tax meaning, it’s important that you don’t confuse this tax with the turnover tax (TOT).
And that’s because there’s a huge difference between the two taxes.
Take a look:
- Though still charged on small businesses, presumptive tax is essentially an advance tax. That means it becomes due before your business is licensed at the specified rates.
- Next, the rates vary. Of course, TOT tax is calculated at 3% of the gross monthly sales while presumptive tax is 15% of the business permit value.
- Lastly, TOT is filed monthly while presumptive tax is filed annually.
Remember that you’re allowed to offset the presumptive tax you pay against the TOT as you file your monthly TOT in the subsequent months.
Make the deductions until you have fully recovered your prepaid presumptive tax.
Can I be exempted from Presumptive Tax?
The following businesses/individuals are exempted from paying presumptive tax:
- Individuals paying tax on their rental income.
- Individuals providing professional management and related services.
- Individuals paying tax on the income of an incorporated company.
- Any other person holding a genuine exemption certificate under the 1st Schedule of the Income Tax Act in Kenya.
- A person who despite belonging to the category of those required to pay presumptive tax applies to the commissioner in writing not to be subjected to presumptive tax in Kenya.
- A resident person with a gross turnover (from their business) exceeding Kshs. 5 million annually.
Are taxpayers required to keep business records?
Presumptive Tax doesn’t need the filing of tax returns as it is usually the case with annual income tax returns so you won’t be asked to maintain any complex business records.
However, you need to prepare an accurate record of turnover to help ascertain your business revenue if need be.
What happens if your business stops operating?
In the event of a business ceasing operations at some point, the taxpayer shall be required to resume the filing of normal tax returns as per the income tax act in Kenya.
For clarification, contact the nearest KRA office or Huduma centre.
You can also call or email KRA directly using the details given below:
Contact center number: 020 4 999 999
Mobile no: 0711 099 999
KRA Twitter handle: @KRACare
There goes our guide on the presumptive tax meaning, how to register and file this tax, and other relevant details on this tax targeting small and micro businesses.
Don’t forget that you’re supposed to deduct the paid presumptive tax in the turnover tax when filing in the subsequent months.
Drop us any questions you might have regarding the presumptive tax in the comments. We shall be happy to guide you.
PS: Watch the video shown below to get the full presumptive tax meaning plus detailed guidelines
Video courtesy of KRA