Filing and paying turnover tax each month
How a Kenyan turnover tax payer files on iTax or the M-Service app, pays by the 20th, keeps daily records and avoids penalties.
By Achekam · · 4 min read · For Running a business businesses in Kenya
Turnover tax was designed to be simple, and in many ways it is. There is one rate, it is charged on sales, and there is no year-end income tax return on the income it covers. But simple is not the same as automatic. Every month there is a return to file and a payment to make, and the penalties for missing either are fixed amounts that do not care how small your business is.
This guide is for the shop owner, the mechanic or the small supplier who is already on turnover tax and wants a monthly routine that works. It covers the due date, the two ways to file, the records KRA expects, the penalties, and where Achekam fits.
How turnover tax works
KRA says turnover tax is a final tax charged on gross sales. No expenses are deductible, and the taxpayer does not file an end-of-year income tax return on the income subject to it. At the time of writing KRA gives the rate as 1.5% of gross sales, effective from 1 July 2023 under the Finance Act 2023. An older KRA document gives a different rate, so rely on KRA's current turnover tax page rather than any old printout.
Because the tax is on gross sales, the figure that matters each month is what you sold, not what you made. A month with high sales and thin margins still produces turnover tax on the full sales figure.
The monthly due date
KRA says a turnover tax return must be filed, and the tax paid, on or before the 20th day of the month following the end of the tax period. Filing and payment share one date, which makes the routine easy to remember: everything for the month just ended is done by the 20th.
Do not wait until the 20th itself. If the 20th falls on a day when you cannot get to your records, or iTax is slow, a late return costs you money, as the penalties below show.
Filing on iTax or the M-Service app
KRA gives two filing routes. The return is filed on iTax, or on the KRA M-Service app, and the tax is paid at a partner bank or through M-PESA. KRA says the M-Service mobile app can be used to file and pay monthly rental income and turnover tax, as well as to apply for PINs and verify tax compliance certificates and PINs.
For a business owner who rarely sits at a computer, the app is the practical choice. For a bookkeeper handling several months at once, iTax may be easier. Either way, keep the acknowledgement and the payment receipt for every month. A tour of the app is in what you can do on the KRA M-Service app.
Daily records of sales and purchases
KRA says turnover tax payers only need to keep daily records of gross sales and purchases. "Only" is the generous part; "daily" is the demanding part. A total scribbled at the end of the month does not meet it.
A simple daily routine:
- At close of business, total the day's sales, whether cash, M-PESA or card.
- Note the day's purchases with the supplier's receipts.
- Keep the record somewhere it cannot be lost: a book that stays in the shop, or your accounting system.
- At month-end, add up the daily sales totals. That sum is the gross sales figure for the return.
Purchases do not reduce turnover tax, since no expenses are deductible, but KRA still expects them recorded, and you will want them anyway to know whether the business is making money.
Penalties and interest
KRA says late filing of a turnover tax return attracts a penalty of KES 1,000 per month, late payment a penalty of 5% of the tax due, and unpaid tax interest of 1% of the tax due. Behind those figures, section 83 of the Tax Procedures Act sets the late filing penalty at one thousand shillings, and section 38 sets late payment interest at one per cent per month or part of a month.
Notice that the filing penalty is a flat amount. A business with very little turnover in a month still pays it in full if the return is late, which is why a nil or small return should still go in on time. KRA's turnover tax page sets out who qualifies, the rate, the due date, the records and the penalties in one place, and is worth bookmarking.
Turnover tax in Achekam once its rule is approved
Achekam computes Kenyan turnover tax, among its other Kenyan tax computations, once the Kenyan rules in the workspace are approved. Before filing, check the computed figure against the sum of your daily sales totals for the month; if the two differ, find out why first.
Achekam does not file the return for you. A person with the business's KRA filing permission files on iTax and uploads the acknowledgement to Achekam, and a different person verifies it before the return counts as filed. That two-person step is a useful check for a small business, where the same person often sells, records and files: a second pair of eyes confirms the acknowledgement matches the month.
When you also need to register for VAT
Turnover tax does not keep a growing business out of VAT forever. KRA says a turnover tax payer dealing in vatable supplies whose turnover reaches Kshs 5,000,000 or more must also register for VAT. Watch your running total of sales across the year, not just each month, so the VAT question does not take you by surprise.
If you are weighing up whether to stay on turnover tax at all, read opting out of turnover tax; accountants supporting small clients will find more in turnover tax for small clients.
Set a reminder a few days before each 20th to total the previous month's daily sales, and file and pay as soon as the figure is ready.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
