Turnover Tax in Kenya (2025) – Simple Guide for Small Businesses & Startups

Turnover Tax in Kenya – 2025 Guide for Small Businesses and Startups

August 3, 2025

Table of Contents:

4. Turnover Tax Rate in Kenya (2025)
5. Turnover Tax vs VAT – Key Differences
6. How to Register for Turnover Tax on iTax
7. How to Calculate Turnover Tax
8. How to File Turnover Tax

9. Exemptions – Who Is Not Required to Pay Turnover Tax
10. Penalties for Late Filing or Payment

11. Benefits of Turnover Tax
12. Frequently Asked Questions on Turnover Tax in Kenya

Who qualifies for Turnover Tax in Kenya?
How do I register for Turnover Tax in Kenya?
How is Turnover Tax calculated?
Is Turnover Tax in Kenya a final tax?
Can I deduct expenses under Turnover Tax?
What happens if I exceed the KES 25M threshold?
What’s the difference between Turnover Tax and VAT?
What’s the turnover threshold in Kenya for Turnover Tax?

13. Conclusion
14. Call to Action – Quartet Consulting Can Help

15. Disclaimer

16. Sources

Key Takeaways

Turnover Tax in Kenya applies to businesses earning between KES 1M and KES 25M annually.
The 2025 Turnover Tax rate is 3% on gross sales – no deductions.
Businesses must file and pay Turnover tax monthly through iTax.
Turnover Tax is final – no further income tax is due on that income.
TOT is best suited for small traders, freelancers, service providers, and startups.

What Is Turnover Tax in Kenya?

Let’s break it down simply – Turnover Tax in Kenya is a friendly, no-frills tax for small businesses.

Rather than diving into your expenses and profits, it charges a flat rate on your total sales.

As of 2025, that Turnover tax rate is set at 3% on your gross sales. It’s designed to make tax compliance less of a headache for small enterprises.

TOT is chargeable under Section 12 (C) of the Income Tax Act (CAP 470)

Who Should Pay Turnover Tax in Kenya?

You should consider Turnover Tax in Kenya if:

Your annual sales are between KES 1 million and KES 25 million
You’re a Kenyan resident – whether an individual or registered business

Please Also Note that:

You can opt out of Turnover Tax by notifying the KRA Commissioner in writing, after which standard income tax rules apply.
TOT-registered taxpayers with Ksh 5 million or more in turnover and dealing in VAT-able supplies must also register for VAT.

Turnover Tax in Kenya doesn’t apply if you earn income from:

Rental property
Consultancy, management, or training services
Dividends or other income already taxed via withholding
If you’re a non-resident

Turnover Tax Rate in Kenya (2025)

Detail	Explantion
Tax Rate	3% of gross sales
Minimum Turnover	KES 1,000,000/year
Maximum Turnover	KES 25,000,000/year
Filing Frequency	Monthly
Payment Due Date	20th day of the following month
Tax Status	Final tax (no further income tax filing required)

Turnover Tax In Kenya vs VAT – Key Differences

Feature	Turnover Tax in Kenya	Value Added Tax (VAT)
Type of Tax	Income tax on gross revenue	Sales tax on value addition
Rate (2025)	3% on total gross sales	16% on value added at each supply stage
Registration Criteria	Annual turnover of KES 1M–25M	Turnover above KES 5M or taxable supplies
What’s Taxed	Total revenue (before expenses)	Final selling price minus input VAT
Deductions	Not allowed	Input VAT is deductible
Record Keeping	Simple – daily sales record only	Complex – invoices, reconciliations
Filing System	Monthly iTax submission	Monthly detailed VAT filing
Is it a Final Tax?	Yes — no income tax after	No – VAT is separate from income tax
Best For	Freelancers, shops, early-stage SMEs	Wholesalers, manufacturers, VAT traders

Confused Between Turnover Tax and VAT?

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How to Register for Turnover Tax on iTax

Head over to itax.kra.go.ke
Log in with your KRA PIN and password
Go to Registration > Amend PIN Details
Choose “Yes” for Turnover Tax
Add the start date under Obligations section
Submit and wait for a confirmation from KRA

How to Calculate Turnover Tax in Kenya

Formula:

Gross Sales × 3% = Turnover Tax Payable

Example:

If your business earned KES 100,000 in gross sales this month:

Tax = 100,000 × 3% = KES 3,000

Tip: Don’t include VAT in your turnover when calculating.

How to File Turnover Tax in Kenya

Log into your iTax portal
Click on Returns and select Turnover Tax Return
Download the Excel form, fill it with your figures
Upload it back to the site
Head to the Payment section and generate a slip
Pay via M-PESA or a registered bank

Exemptions – Who Is Not Required to Pay Turnover Tax in Kenya

Turnover Tax in Kenya isn’t for everyone. You’re exempt if:

You earn rental income
You’re paid for professional or training services
You receive income already taxed via withholding (e.g. dividends, interest)
You’re a non-resident taxpayer

Penalties for Late Filing or Payment of TurnOver Tax

Turnover Tax In Kenya Violation	Penalty
Late Filing	KES 1,000 per month
Late Payment	5% of unpaid tax amount
Interest	1% per month on overdue tax

Benefits of Turnover Tax in Kenya

No complicated tax returns – You just pay your 3%
Monthly compliance keeps you on track
Can pay directly via mobile phone (M-PESA)
Works well for small, low-cost businesses
Once paid – you’re done! It’s a final tax

Frequently Asked Questions on Turnover Tax in Kenya

1. Who qualifies for Turnover Tax in Kenya?

Anyone with annual gross sales between KES 1 million and KES 25 million, excluding professionals and landlords.

2. How do I register for Turnover Tax in Kenya?

Login to your iTax account, update your obligations, and select Turnover Tax.

3. How is Turnover Tax calculated?

Take your gross monthly revenue, multiply by 3%, and that’s the tax due.

4. Is Turnover Tax in Kenya a final tax?

Yes. Once paid, you don’t file additional income tax on that same revenue.

5. Can I deduct expenses under Turnover Tax?

No expenses are allowed for deduction.
Turnover Tax in Kenya is based on your gross income, not net profit.

6. What happens if I exceed the KES 25M threshold?

Let KRA know and switch to the normal income tax system.

7. What’s the difference between Turnover Tax and VAT?

Turnover Tax is a simple tax on gross income. VAT is more detailed and tracks every transaction.

8. What’s the turnover threshold in Kenya for Turnover Tax?

Your business must earn at least KES 1 million but not more than KES 25 million annually.

Conclusion

If your business is still finding its footing, Turnover Tax in Kenya can make your tax life so much easier.

No receipts to reconcile, no tax returns to sweat over – just a flat 3% on your total sales. It’s a great option if you’re running a small shop, freelancing, or offering basic services.

But make sure you stay within the thresholds and file your returns on time. And when in doubt, ask a pro.

Call to Action – Quartet Consulting Can Help

At Quartet Consulting, we take the stress out of tax. Whether you’re just getting started or already trading:

We’ll get you registered quickly
Help you file your Turnover Tax on time
Guide you when it’s time to switch to VAT or regular income tax

Contact Us Today!

Disclaimer

This guide is for educational purposes only. It’s not legal advice. If you need help with Turnover Tax in Kenya, get in touch with a licensed tax advisor or contact Quartet Consulting directly.

Sources