Introduction
Turnover Tax (TOT) is a simplified tax system designed for small businesses in Kenya. With a 3% rate on gross sales, it helps micro and small enterprises comply with tax obligations without complex accounting.
If your business earns between KSh 1M – KSh 25M annually, this guide explains eligibility, registration, filing, and penalties under the 2025 TOT rules.
1. What is Turnover Tax (TOT)?
✅ A final tax on gross sales (no deductions allowed).
✅ Applies to: Resident individuals, partnerships, and sole proprietors.
✅ Excludes: Companies, rental income, professional fees, and non-residents.
Why TOT?
- Simplified compliance (no annual income tax returns).
- Lower administrative burden for small businesses.
2. Who Qualifies for TOT in 2025?
Eligibility Criteria:
✔ Annual turnover: KSh 1M – KSh 25M
✔ Business type: Sole proprietors, partnerships (not limited companies).
Exemptions (Not Eligible for TOT):
❌ Rental income
❌ Management/professional fees
❌ Businesses with turnover above KSh 25M
❌ VAT-registered businesses (if turnover ≥ KSh 5M)
3. TOT Rate & Payment (2025 Update)
| Tax Type | Rate | Due Date |
|---|---|---|
| Turnover Tax (TOT) | 3% of monthly gross sales | 20th of the next month |
Key Notes:
- No expense deductions – Tax is calculated on total sales.
- Final tax – No additional income tax filing required.
4. How to Register for TOT
Step-by-Step Process:
1️⃣ Log in to KRA iTax (https://itax.kra.go.ke).
2️⃣ Go to “Registration” > “Amend PIN Details”.
3️⃣ Section A: Answer “Yes” to “Register for TOT?”.
4️⃣ Section B: Select TOT registration date.
5️⃣ Submit and wait for approval.
5. Filing & Paying TOT (2025 Guide)
Deadline: 20th of the following month (e.g., January sales due by 20th February).
How to File & Pay:
Option 1: iTax Portal
1️⃣ Log in to iTax.
2️⃣ Go to “Returns” > “File Return” > “Turnover Tax”.
3️⃣ Download Excel form, fill in sales, and upload.
4️⃣ Generate payment slip and pay via:
- Bank (RTGS/Cheque)
- M-Pesa (via KRA Paybill)
Option 2: KRA M-Service App
- File and pay directly via mobile.
6. Penalties for Late Filing & Non-Compliance
⚠ Late Filing: KSh 1,000 per month
⚠ Late Payment: 5% penalty + 1% monthly interest
Tip: Set reminders to avoid penalties!
7. Benefits of TOT for Small Businesses
✔ Simpler tax calculations (no complex deductions).
✔ No annual income tax return required.
✔ Mobile-friendly filing (via KRA M-Service App).
✔ Encourages tax compliance for small traders.
Final Thoughts
TOT makes tax compliance easier for small businesses. If your turnover is below KSh 25M, this could be the best tax regime for you.
📢 Need help? Consult a KRA-registered tax agent for smooth filing!
