Top 5 Taxes Kenyan SMEs Must Know in 2025

Q: Who doesn’t pay TOT in Kenya?

If your business turnover is below KSh 1 million per year, you are not required to pay TOT. However, KRA still expects you to file nil returns every month to remain compliant.

Q: What’s the PAYE threshold in 2025?

The PAYE threshold in Kenya 2025 is KSh 24,000. Employees earning below this don’t pay PAYE. However, SMEs must still handle statutory deductions like SHIF and NSSF as part of their tax obligations.

Q: What is a Tax Compliance Certificate?

A Tax Compliance Certificate (TCC) is a free document issued by KRA confirming that your business is up to date with all tax obligations. Many SMEs need it when applying for government tenders, contracts, or loans.

Q: Must I register for eTIMS in 2025?

Yes. All SMEs in Kenya 2025 must register for eTIMS and issue invoices through the platform. This is now part of Kenya’s modern SME tax compliance framework.

Taxes for SMEs in Kenya 2025 – Top 5 Taxes Kenyan SMEs Should Know

August 25, 2025

Running a business in Kenya is exciting – but one thing you can’t escape is taxes.

If you own a printing shop in Nairobi, a tech start-up, or a small retail store, you’ve probably asked yourself:

Which taxes do I really need to pay as an SME in 2025?
How do I even start – what do I register for first?

This guide by Quartet Consulting breaks down the top taxes for SMEs in Kenya 2025 – VAT, PAYE, statutory deductions, Turnover Tax, and Withholding Tax – with rates, deadlines, and simple examples.

Not sure if your SME is fully tax compliant in 2025? Don’t wait until penalties hit.”

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Table of Contents:

1. Before You Start: KRA PIN & eTIMS

2. TOP 5 Taxes you must know as an SME Owner in Kenya

3. PAYE in Kenya 2025 – Employee Income Tax for SMEs

4. Statutory Deductions (Explained first, then calculated)

4.1 NSSF – what it is, who it covers, how it’s calculated
4.2 SHIF – what it is, who it covers, your employer duties
4.3 Affordable Housing Levy (AHL) – what it is & who pays
4.4 Putting it together: example deductions on a KSh 50,000 salary

5. Turnover Tax (TOT) – for turnover between KSh 1M–25M

6. Withholding Tax (WHT) – how/when to deduct at source

7. FAQs (2025) – Tax Services for SMEs in Kenya

8. Conclusion & Next Steps – Talk to Quartet Consulting

9. Disclaimer

Before You Start Paying Taxes in Kenya

Before worrying about the different taxes, make sure your SME has the following basics:

1. KRA PIN

Every business must have a KRA PIN.
If you don’t have one already, You’ll need to Apply on iTax

The Requirements needed include: National ID, Certificate of Incorporation/Business Name certificate, and a working email

2. eTIMS Registration

ETims, short for (Electronic Tax invoice Management System) is a KRA software platform that allows you to create and generate an automatic electronic invoice. It is free to set up and free to use.

All traders, regardless of turnover, must onboard eTIMS and generate invoices as per the Tax Procedures Act.

TOP 5 Taxes you must know as an SME Owner in Kenya

1. Value Added Tax (VAT) in Kenya 2025 – A Must-Know SME Tax

What it is:

VAT is one of the most important taxes for SMEs in Kenya 2025. It applies to businesses with annual sales above KSh 5 million. Your customer pays it, but as an SME you collect and remit it to KRA.

Who must register:

All Businesses with annual sales above KSh 5 million.

VAT details for 2025
Applicability:	SMEs with annual sales of more KSh 5M
Rate:	16%
Filing Deadline:	20th of the following month
Penalties:	KSh 20,000/month + 5% of tax due + 1% monthly interest

Example:

You sell goods worth KSh 100,000.
VAT = 16% = KSh 16,000
You invoice KSh 116,000 to the customer
You later remit KSh 16,000 to KRA.

Tip: Keep clean records of your sales and purchases.

Not sure how VAT works? Don’t worry – we’ve covered it step-by-step in our Value Added Tax (VAT) in Kenya – Basic Guide

2. PAYE in Kenya 2025 – Employee Income Tax for SMEs

If your SME has employees:

PAYE in Kenya is a mandatory tax, As part of the top 5 taxes for SMEs in Kenya 2025, you must:

Register for PAYE on iTax as an employer. This process is completely free.
Deduct PAYE from salaries every month, and
Remit by the 9th of the following month.

Who pays:

Employees earning above KSh 24,000/month.

Personal relief:

KSh 2,400 per employee, per month.

Kenya PAYE Bands (2025) VAT details for 2025
Monthly Income Band (Ksh)	Rate
Up to 24,000	0%
24,001 – 32,333	10%
32,334 – 500,000	25%
500,001 – 800,000	30%
Above 800,000	35%

The Deadline for filing your PAYE : 9th of the following month

Summary: If your SME has employees, you must register for PAYE in Kenya 2025. PAYE is deducted monthly from salaries and remitted to KRA by the 9th.

3. Statutory Deductions – NSSF, SHIF & Housing Levy

You’ll often hear “statutory deductions.” These are mandatory alongside PAYE:

Besides PAYE, SMEs in Kenya must handle statutory deductions in 2025 – NSSF, SHIF, and the Affordable Housing Levy.

VAT, PAYE, SHIF, NSSF – it’s a lot to track. Our checklist makes it simple

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a) NSSF (National Social Security Fund)

What it is:

Kenya’s retirement savings scheme. Think of it as your employees’ basic pension.

Who it covers:

Almost all employees in formal work (and many in informal work via voluntary contributions).

Your duty as an employer:

Register your business and your employees with NSSF
Deduct employee contributions, add your employer share, and remit by the 9th of the following month

How it’s calculated (2025):

6% employee + 6% employer, using a two-tier system
Tier I (Lower Limit): Up to KSh 8,000 → capped at KSh 480 (employee), KSh 480 (employer)
Tier II (Upper Limit): From KSh 8,000 to KSh 72,000 → 6% of this portion (matched by employer)
Maximum monthly contribution: KSh 4,320 (employee) + KSh 4,320 (employer) for high earners

In short: NSSF is long-term savings for your staff. You must register, deduct, match, and remit on time.

b) SHIF – Social Health Insurance Fund (Under SHA)

What it is:

Kenya’s national health insurance scheme replacing NHIF. SHA (Social Health Authority) oversees SHIF and related funds.

Why it exists:

To fund healthcare access for all Kenyans.

Who it covers:

Employees, households and other contributors as specified by law.

Your duty as an employer:

Register your business and employees,
Deduct the employee share, add the employer share, and remit by the 9th.

How it’s calculated (2025):

2.75% of gross salary (employee) + 2.75% (employer)

Bottom line: SHIF keeps your team covered. You must deduct, match and remit.

c) Affordable Housing Levy (AHL)

What it is: A levy to support Kenya’s Affordable Housing Program.
Who pays:
- Employees: 1.5% of gross salary (deducted from pay)
- Employers: 1.5% of each employee’s gross salary (your cost)
- Self-employed: 1.5% of gross monthly income
Cap: Total monthly contributions must not exceed KSh 5,000 per employee.
Deadline: 9th of the following month (employer remittance).

d) Putting It Together – Example Deductions on KSh 50,000 Gross

Note: PAYE varies with personal relief and any other benefits

Type of Statutory Deduction	Employee Pays	Employer Pays
PAYE	5,845.85
NSSF Tier I	480.00	480
NSSF Tier II	2,520.00	2520
SHIF	1,375.00	1375
Housing Levy	750.00	750
Total Deductions	10,970.85
Employee’s Net Pay	39,029.15

4. Turnover Tax (TOT)

What it is:

Turnover Tax (TOT) in Kenya 2025 is a simplified tax created for SMEs and small businesses with annual gross sales between KSh 1M and 25M. It’s one of the easiest tax for SMEs in Kenya 2025 to calculate and pay.

Applicability:

Annual sales between KSh 1M – 25M

How much is TOT?

The current rate is 1.5% of your gross sales (not your profit).
Previously, it was 3%, but it was reduced to make things lighter for small businesses.

Filing deadline:

You must file and pay TOT by the 20th of the following month after the sales were made.

Is Turnover Tax a final tax?

Yes, TOT is a final tax. This means you don’t have to file an end-of-year income tax return on income already taxed under TOT.

Penalty for Turnover Tax

Late filing: KSh 1,000 per month
Late payment: 5% of the tax due
Interest on unpaid tax: 1% per month

Quick Example:

If your monthly sales = KSh 500,000, then TOT = 500,000 × 1.5% = KSh 7,500.
If your sales = KSh 1,500,000, you’re automatically under TOT and must file monthly returns.

Learn more in our Turnover Tax in Kenya guide.

5. Withholding Tax (WHT)

What is Withholding Tax?

Withholding Tax (WHT) in Kenya 2025 is another important SME tax obligation.
It is a tax collection method where the payer of certain incomes deducts tax before making payment to the recipient. The deducted tax is then sent to KRA (Kenya Revenue Authority).

Think of it this way: instead of waiting for the payee to file taxes at the end of the year, the government collects part of the tax at the source.

When is WHT applied?

WHT applies to certain payments like professional fees, dividends, and rent. The deduction rate depends on:

The type of income
Whether the payee is a resident or non-resident

Here’s a simple breakdown:

Payment Type	Resident	Non-Resident
Professional Fees	5%	20%
Dividends	5%	10%
Rent	10%	30%

Example of WHT in action

Let’s say you hire a tax consultant (like Quartet Consulting) for KSh 100,000.

Since this is a professional service, you must withhold 5% = KSh 5,000
You pay the consultant KSh 95,000
You then remit KSh 5,000 to KRA

Filing deadline for WHT

The deducted tax must be remitted to KRA by the 20th of the following month

FAQs – Tax Services for SMEs in Kenya

Q1. How much tax do SMEs pay in Kenya in 2025?

SMEs in Kenya 2025 may pay VAT, PAYE, statutory deductions, Turnover Tax, and Withholding Tax. The exact amount depends on turnover, employee salaries, and your business structure.
These are the top 5 taxes for SMEs in Kenya 2025 every business owner must understand:VAT, PAYE, TOT, Statutory deductions and Withholding Taxes

Q2. Who doesn’t pay TOT in Kenya?

If your business turnover is below KSh 1 million per year, you are not required to pay TOT. However, KRA still expects you to file nil returns every month to remain compliant.

Q3. What’s the PAYE threshold in 2025?

The PAYE threshold in Kenya 2025 is KSh 24,000. Employees earning below this don’t pay PAYE. However, SMEs must still handle statutory deductions like SHIF and NSSF – part of the wider SME tax obligations in Kenya 2025.

Q4. What is a Tax Compliance Certificate?

A Tax Compliance Certificate (TCC) is a free document issued by KRA confirming that your business is up to date with all tax obligations.
Many SMEs need it when applying for government tenders, contracts, or even loans.

Q5: Must I register for ETIMS in 2025?

Yes. All SMEs in Kenya 2025 must register for eTIMS and issue invoices through the platform. This is now part of Kenya’s modern SME tax compliance framework.

Conclusion

In summary, the top 5 taxes for SMEs in Kenya 2025 are VAT, PAYE, statutory deductions, TOT, and WHT. Knowing these SME taxes helps you stay compliant, avoid penalties, and plan your cash flow.

At Quartet Consulting, we help SMEs handle registration, filing, compliance, and tax planning so you can focus on growing your business.

Understanding SME taxes is one thing. Staying compliant every month is another. Why do it alone?

We’ll guide you through compliance, filings, and a tax strategy that actually saves you money — and we promise to call you within 48 hours.

Book Your Free Consultation with Quartet Consulting Today

Disclaimer

This tax guide is for general information only. Tax laws in Kenya change often, so always confirm the latest rules with KRA or a licensed tax consultant.

Sources