Kenya's Presumptive Tax Was Scrapped. What to Pay Instead.

Presumptive tax no longer exists. It was repealed by the Finance Act 2020 and stopped applying in April 2020, after about sixteen months on the books. If you are self-employed and someone has told you to go and register for it, they are working from rules that expired more than five years ago.

The term survives anyway. It still comes up at county offices, in WhatsApp groups, and in older guides nobody went back to update. What a small business actually owes now is Turnover Tax, and the difference is not cosmetic: presumptive tax was paid once a year, and Turnover Tax is filed every month.

What Presumptive Tax Was

It started on 1 January 2019, aimed at traders who were never going to keep full accounts — salons, kiosks, repair shops, boda operators. Instead of working out profit, you paid a charge pegged to the fee for your single business permit, settled at the county when you took out or renewed that permit. No monthly return, no receipts, no bookkeeping.

It lasted barely over a year. It overlapped awkwardly with Turnover Tax, which was aimed at much the same businesses, and collecting it through county permit desks never worked well. The Finance Act 2020 removed it and left Turnover Tax standing.

What You Pay Instead

Turnover Tax is charged at 3% of gross monthly sales — the money that comes in, before rent, stock, wages or transport go out. You file it on itax.kra.go.ke by the 20th of the month after the one you are reporting, and you file in the quiet months too: a month with no sales still needs a nil return.

The turnover band that decides whether TOT applies to you has been moved more than once by successive Finance Acts, so do not take a figure from a blog post, this one included. Log into iTax and read the obligations registered against your PIN. That page is the only answer that counts, and it is what KRA measures you against. Our walkthrough of filing Turnover Tax on iTax covers the screens step by step.

Two habits from the presumptive era cause real trouble under TOT. The first is paying once a year: miss eleven monthly returns and the penalties stack per return, not per year. The second is assuming one charge covers everything. If you employ anyone you still deduct PAYE, SHIF and NSSF and remit monthly, and if you are VAT-registered you still file VAT.

If You Paid Presumptive Tax Before 2020

There is nothing left to pay and nothing to reclaim — the obligation simply ceased. What does still surface is an old dormant obligation sitting on a PIN from that period, quietly generating nil-return penalties while nobody looks at it. If your iTax account lists an obligation you do not recognise, deal with it before it compounds. You can see what has built up with the KRA penalty calculator, and a tax expert on Kaziiko can file the back returns and apply for a waiver.

Frequently Asked Questions

Is presumptive tax still charged anywhere in Kenya?

No. It was repealed with effect from April 2020. Your county may still charge a single business permit fee, but that is a county licence, not a KRA tax. The two were tied together under presumptive tax, which is where most of the confusion comes from.

Does Turnover Tax replace income tax completely?

For the business income it covers, yes — you do not also file self-assessment on the same turnover. It does not cover PAYE for staff, VAT if you are registered, or rental income. Each of those stays a separate obligation.

Can I deduct expenses under Turnover Tax?

No. TOT is charged on gross sales, so a thin-margin month is taxed the same as a strong one. If your costs run high against your sales, it is worth checking whether ordinary self-assessment leaves you better off. That comparison needs your real figures, so speak to a verified expert before you switch.

What if I never filed because I thought presumptive tax covered me?

File the outstanding returns rather than waiting to be found. Late TOT returns attract penalties and interest that grow every month, and KRA can withhold your tax compliance certificate, which stops you bidding for tenders or clearing goods at the port. A waiver is possible, and the application goes better once the returns are already in.