TOT Meaning in KRA (What is TOT tax in Kenya?)

This article introduces you to TOT meaning in KRA so read on to the end if you’re unsure what exactly TOT is.

The Kenya Revenue Authority collects revenue from taxes on behalf of the government.

Now, the turnover tax (abbreviated as TOT by many) is one of the taxes that taxpayers- and specifically small businesspeople- have to pay.

Let us now learn what is TOT meaning in KRA in detail .

TOT meaning in KRA

So: What is TOT meaning in KRA?

Here is the answer….

What is TOT tax?

Turnover Tax (TOT) is a tax paid by small businesses in Kenya on their monthly income sales value on or before the 20th of the following month.

Furthermore, since turnover tax is a final tax, you don’t need to do VAT returns – but it is important you file your annual income tax returns if you have other sources of income (If not, do a NIL return to be on the safe side).

Who exactly should pay turnover tax in Kenya?

You should be aware that turnover tax is applicable if your annual business revenue exceeds Kshs. 1,000,000 but falls below Kshs. 50,000,000.

In other words, you are eligible for turnover tax if you own and run a business in Kenya with annual gross revenue that falls under this tax bracket.

This generally applies to micro, small, and medium-sized businesses.

How to file for TOT tax in Kenya

Now, if you’re eligible to file for turnover tax in Kenya, you must first register for the turnover tax obligation on Itax portal.

Once accepted, you must deduct 1% of your monthly gross sales- it is this amount that you’ll be invoiced for when doing your turnover tax returns every month.

Keep in mind that you need to maintain accurate records of gross sales, as this is where you’ll be getting the right information when filing.

More on TOT filing process in Kenya later..

More about Turnover tax rate in Kenya

During the COVID-19 pandemic, the Finance Act of 2020 imposed a 1% minimum tax on gross revenue( The old rate on gross monthly sales was 3%).

However, your expenses are not tax deductible-you should not deduct costs such as rent and utility bills from the total sales amount for the relevant month.

When is Turnover tax due in Kenya?

Just like any other tax obligation in Kenya, turnover tax also has a due date.

Now, turnover tax is often due on or before the 20^th day of the following month.

Therefore, as a business owner, make sure to submit your returns by the due date.

For instance, your TOT returns for January will have to be filed by latest 20th of February.

Likewise, your TOT returns for June will have to be filed by latest 20th of July.

Just to remind you, failure to file your returns on time results in a monthly penalty.

Indeed, last time i checked, late filing incurs a Kshs. 1,000 penalty per month whereas late payment attracts a 5% penalty on the tax due.

Also, interest on the unpaid tax is 1% of the principal tax due.

How to file TOT tax in Kenya

Do you own a business in Kenya and need to file monthly turnover tax returns but are unsure where to start?

Well, here’s a guide to filing your turnover tax.

To be able to file turnover tax for your business, you should have a few things ready before you begin the process of filing your turnover tax returns.

These include a KRA PIN Number, a KRA iTax Password, and the month’s total gross sales.

The following is a step-by-step guide to filing your turnover tax:

Log in to itax.go.ke, using your KRA PIN Number and KRA Password.
Go to the ‘Returns’ menu, select ‘File Returns’ and then ‘Turnover Tax’, and download the turnover tax returns form(which is usually in Excel format).
Complete the return form with the required details including gross sales then upload by clicking on the provided tab.
Now download the turnover tax acknowledgment receipt.
After completing the final tax return, go to the payment tab, select “Payment”, select the amount to be paid (the amount you submitted), and generate a payment slip.
You can make the payment at a partner bank or through M-Pesa.

The good news is that you can now easily file and pay your turnover tax using the KRA M-service APP on your mobile phone, from the comfort of your business, without having to go to a cyber café.

Some tips to keep in mind:

All eligible taxpayers are encouraged to register with iTax, add their TOT obligations, file monthly returns and make payments.
A taxpayer whose turnover falls within the specified thresholds but chooses not to be taxed under the TOT should notify the Commissioner (by letter) of this decision by not choosing his/her TOT registered.

Difference between TOT and VAT

Both turnover tax (TOT) and value-added tax (VAT) are intended to ensure that businesses pay tax.

However, one significant difference between TOT and VAT is that TOT is a final tax charged on a business’s gross sales and is only paid once, whereas VAT is charged on intermediate and potential capital goods multiple times before reaching the final consumer.

Besides, only businesses that generate over Kshs. 50,000,000. in revenue qualify for VAT while those whose sales are between Kshs. 1,000,000 -Kshs. 50,000,000.00 qualify for TOT.

Don’t forget that VAT tax is collected and remitted to the government each time a value is added or a sale is made.

Advantages of turnover tax

Want to learn more about the advantages of the Turnover Tax?

The turnover tax has numerous advantages, including:

Simplified filing and payment procedures, including mobile phone payments.
Expenses are reduced because there is no need for accountants, computers, or electronic tax registers.
Taxpayers are not required to keep complex records; instead, they must keep a daily gross sales record.
When compared to other income tax rates, the 1% tax rate is relatively low. Given that it is a final tax, the 1% TOT rate is significantly lower.
Reduced time for filing and paying taxes. You can complete the entire filing process in a matter of minutes.
Because turnover tax is a final tax, a person is not required to file VAT returns as well as the annual income tax return.

Wrap-up on TOT meaning in KRA

Turnover Tax (TOT) is a tax paid by small businesses in Kenya on their monthly income sales value on or before the 20th of the following month.

Keep in mind that the current rate is 1% of your gross monthly sales revenue.

PS: You can watch Great Videos explaining Turnover tax in Kenya on KRATV

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