KRA assures business owners of smooth transition to new tax system

The Kenya Revenue Authority (KRA) has assured business owners of a smooth transition from a turnover levy to a presumptive tax regime for entities with yearly incomes below Ksh.5 million ahead of implementation from the January 1, 2019.

Charged at the rate of 15 percent of the business permit or trade license fee, the presumptive tax was introduced in the current 2018/2019 financial year budget statement to replace the current turnover tax, this aims to reduce the compliance burden for small businesses.

In a statement to media houses, KRA backed its engagement with business owners to result in an untroubled passage to the new taxation system.

“So far, KRA has conducted sensitisation seminars around the country with the view to ensure that tax payers who fall under this tax bracket transition from turnover tax to presumptive tax seamlessly,” read the statement.

Tax payers will be required to make payment for the presumptive tax at the point of obtaining and making payment of business permits/trade licenses or the renewal of the same by their respective county governments.

Businesses offering management and professional services are however exempt from the new tax alongside incorporated companies, rental businesses and individuals exempt from income tax altogether.

A presumptive tax era is deemed as simple and cheap to comply to with similar benefits as the turnover tax but has drawbacks including reliance on the willingness and honesty of tax payers.

This is a difficult fete for government given the large number of businesses who operate without licenses.

“From a taxpayer’s perspective, the presumptive tax is expected to simplify compliance, ease the determination of the amount of tax to pay, making tax returns and payment to the tax authority,” reads a note from the Tax Kenya website.