Understanding Turnover Tax (TOT)

Turnover Tax, commonly abbreviated as TOT, is a simplified tax system introduced by the Kenya Revenue Authority (KRA) targeting micro and small enterprises. Unlike income tax, which is based on profit, turnover tax is levied on gross sales—regardless of whether the business makes a profit or not.

This tax was reinstated under the Finance Act of 2019 and is meant to enhance compliance while easing the administrative burden for small traders and informal businesses that may struggle with complex accounting systems.

Who Should Pay Turnover Tax?

Turnover Tax is specifically designed for businesses whose annual gross turnover does not exceed KES 5 million. This includes:

• -Small-scale retailers

• -Service providers

• -Sole proprietors

• -Informal businesses that are not VAT-registered

However, certain categories are exempt from TOT, including:

• -Limited liability companies

• -Persons earning employment income only

• -Rental income earners

• -Management, professional, or training service providers

• -VAT-registered persons

These exemptions ensure that TOT targets only small-scale traders and non-complex businesses.

How Turnover Tax Is Calculated

TOT is calculated as a percentage of the business's total gross sales. As of 2025, the applicable rate is 1% of gross turnover, with no deductions allowed for business expenses. That means if a trader earns KES 100,000 in a month from sales, the TOT payable is KES 1,000.

This simplicity makes it easy for small businesses to remain compliant without engaging in detailed bookkeeping.

When and How to File TOT

Turnover Tax is filed monthly through the KRA iTax portal. Taxpayers must:

1. 1.Log in to their iTax account

1. 2.Navigate to the returns section

1. 3.Select the "Turnover Tax Return"

1. .4Declare total gross sales for the month

1. 5.Pay the calculated tax due (1%)

The deadline for monthly TOT filing and payment is the 20th day of the following month. Late payments attract penalties and interest.

Why Compliance Is Important

Filing and paying Turnover Tax on time protects small businesses from unnecessary penalties and legal issues. It also builds a positive tax profile for the taxpayer, which may be beneficial when applying for government tenders, loans, or permits.

Additionally, staying compliant helps business owners formalize their operations, increasing credibility in the market and laying a foundation for sustainable growth.

Conclusion: A Simple Tax for Small Enterprises

Turnover Tax offers a practical and manageable solution for small businesses that may find standard income tax too complex. It is a flat, predictable, and accessible way to remain tax compliant without the need for advanced accounting knowledge. Businesses that fall within the turnover threshold should register and file TOT diligently to avoid penalties and ensure smooth operations.