Martin Mwita @PeopleDailyKE
Small businesses will pay presumptive tax of 15 per cent from January 1, as Kenya Revenue Authority (KRA) moves to implement proposals to net more revenue from the informal sector.
Under the new tax regime, persons acquiring or renewing business permits or licences shall pay this tax at the rate of 15 per cent based on their single business permit fee.
This will replace the turn over tax introduced over a decade ago (Finance Act, 2006), which has faced non-compliance mainly occasioned by the challenges of profiling the informal sector.
Presumptive tax is based on available basic facts while determination of turnover tax is heavily dependent on accounts records and books.
The measure targets businesses with an annual turnover of less than Sh5 million, meaning it will capture small traders seeking approval of county governments to do business.
“Kenya Revenue Authority wishes to notify the public that in accordance with Finance Act, 2018, the Presumptive Tax shall become payable from January 1, 2019.
The tax does not apply to persons engaged in management of professional services, rental businesses and incorporated companies,” the taxman said in a public notice yesterday.
According to KRA all eligible taxpayers will be required to pay the levies at the time of payment for business permit fee or trade licence.
National Treasury Cabinet Secretary Henry Rotich proposed the presumptive tax during the 2018-2019 budget presentation on June 14, paving way for a new strategy on collection of taxes from small enterprises that have previously proved difficult to monitor.
He said the informal sector in the country is expansive and remained out of the tax net. The model is expected to widen the tax bracket while increasing revenue collection, a win for the taxman who has been struggling to meet its budgetary tax obligation.
KRA has a target of Sh1.97 trillion in the current financial year ending June 30, 2019, up from Sh1.6 trillion the previous financial year.
To help meet the target, Treasury also introduced an array of taxes captured in the Finance Act 2018 which was signed into law by President Uhuru Kenyatta on September 21.
This includes the eight per cent value added tax (VAT) on petroleum products (revised from 16 per cent) and levies in the financial sector services among them mobile money services.
Eligible tax payers will have to log onto iTax to make payment for presumptive tax, meaning KRA will have record of such traders for follow-ups.