The Tax Laws (Amendment) Act, 2020 modified the turnover tax regime by reducing the tax rate from 3% to 1% of gross receipts, applicable to businesses with a minimum threshold of Kshs 1,000,000 and an increased exemption limit from Kshs 5 million to Kshs 50 million per year. The turnover tax does not affect VAT registrations and does not apply to non-resident taxpayers, as well as certain income types including rental and management fees that are taxed through withholding. Incorporated entities have now been included under the turnover tax regime.

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Turnover Tax (TOT) amendments

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Following the presidential directive, The Tax Laws (Amendment) Act, 2020
amended the Turnover tax regime as follows;
• Reduced tax rate of Turnover Tax from 3% to 1%of the gross receipts of the
business, payable monthly;

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• Turnover Tax does not affect a taxpayers’ registration for VAT for those meeting the
VAT requirements;
• The value for computation of turnover tax for a taxpayer registered for VAT is the
amount net of VAT;

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• Introduced a minimum threshold of Kshs 1,000,000;
• Introduced incorporated entities into the turnover tax regime ;

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• Increased the threshold from the current Kshs 5 million to Kshs 50 Million per year;
• Turnover tax does not apply to non-resident taxpayers;

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• Turnover tax does not apply to taxpayers in receipt of rental income, management fee,
professional fee or training fees and
• Turnover tax does not also apply to income which suffers withholding tax which is
final like qualifying dividends or qualifying interest.

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The End