KRA waives presumptive tax for new businesses


Times Towers, Kenya Revenue Authority Head Office.
Times Towers, Kenya Revenue Authority Head Office.

In Summary

  • Further measures to simplify tax payments by business include the online filing of deductions made to the National Social Security Fund (NSSF) and the separation of payments for Capital Gains and Stamp Duty which were previously twinned.
  • The presumptive tax represents a simplified tax regime for SMEs which is charged at 15 per cent of the value of a single business permit issued by a County Government and applies to businesses whose turnover does not exceed Ksh.5 million.
  • The tax is however offset against the turnover tax payable which is presently calculated at one percent of the businesses yearly sales.

The Kenya Revenue Authority (KRA) has waived presumptive tax for new businesses in their first 24 months of operations as part of measures to simplify tax payments ease business costs.

In a notice, the tax man has further indicated the waiver of the Nairobi County Single Business Permit although it did not indicate whether the relief would be extended to business in the other 46 Counties.

Further measures to simplify tax payments by business include the online filing of deductions made to the National Social Security Fund (NSSF) and the separation of payments for Capital Gains and Stamp Duty which were previously twinned.

Moreover, the taxman has allowed the amendment of tax return filed online while the National Industrial Training (NITA) levy has made made annual and payable on i Tax.

The new measures are aligned to KRA’s recent automation of tax payment particularly by small and medium enterprises (SMEs) which allows the settlement of pending tax arrears through mobile phones.

The move is geared at enhancing tax compliance especially by members of the country’s informal sector which is yet to be incorporated fully to the tax bracket.

The presumptive tax represents a simplified tax regime for SMEs which is charged at 15 per cent of the value of a single business permit issued by a County Government and applies to businesses whose turnover does not exceed Ksh.5 million.

The tax is however offset against the turnover tax payable which is presently calculated at one percent of the businesses yearly sales.

This means that businesses have from this year recovered the presumptive tax paid as it is deducted from turnover tax due.

The 2020 Tax (Ammendments) Act lowered the effective turnover tax rate from three to one percent effective in April lowering the overall tax paid by SMEs in the country.

In his address to the nation at the end of September, President Uhuru Kenyatta recommended a hold of the turnover tax (ToT) beyond December 31 as he proposed the return of previous tax rates including PAYE and corporation tax from January 1, 2021.

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