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Turnover Tax (TOT) for Small Businesses in Kenya: Complete 2026 Guide

📅 27 May 2026 · ✅ Last verified: 28 October 2026 · 📖 6 min read · Tax & KRA

If your resident business has annual gross turnover of more than KES 1 million and no more than KES 25 million, Turnover Tax (TOT) may apply, subject to the exclusions and other conditions below. No complicated expense tracking, no year-end profit calculations — just 1.5% of your gross sales, filed monthly through iTax.

Yet many eligible business owners either don't know about TOT, accidentally overpay under a different tax regime, or miss filings and rack up avoidable penalties. This guide covers everything you need: who qualifies, how to register, step-by-step filing, and what happens if you don't comply.

Black Kenyan shopkeeper tallying gross sales in a handwritten notebook beside dated receipts and a calculator
Original editorial artwork; no official interface or endorsement depicted.

Quick reference

At a glance

Rate
1.5% of gross monthly sales
Annual turnover
KES 1M–25M
Filing deadline
20th of each month
Where to file
KRA iTax or M-Service

This is an orientation summary, not an official tax assessment. Check the latest KRA guidance before filing.

1. What is Turnover Tax (TOT)?

Turnover Tax (TOT) is a simplified tax regime for micro and small businesses in Kenya, introduced under Section 12(C) of the Income Tax Act (CAP 470). It is a presumptive tax charged on a business's gross sales or turnover, not on profit.

The key features of TOT:

  • Current rate of 1.5% on gross monthly sales, exclusive of VAT. The Affordable Housing Act 2024 reduced the rate from 3% to 1.5% from 22 March 2024; KRA applied the change from the March 2024 return.
  • No expense deductions — tax is charged on turnover, not profit
  • Final tax — once you pay TOT, you don't need to file an end-of-year income tax return on that income
  • Simplified record keeping — you only need daily gross sales records and daily purchase records
  • Monthly filing — returns are due by the 20th of each month
💡 Key Benefit Only income subject to TOT receives final tax treatment. No annual income tax return is required for that income; other income or obligations may require separate returns. File and pay TOT monthly, by the 20th.

2. Who is Eligible for TOT?

The numeric turnover band for a resident person is annual gross turnover more than KES 1,000,000 and no more than KES 25,000,000, subject to the exclusions below.

  • The taxpayer is a resident person, including an individual, partnership, or company
  • Annual gross turnover is strictly above KES 1,000,000 and does not exceed KES 25,000,000

TOT does not apply to:

  • Annual gross turnover of KES 1,000,000 or less. This only describes the TOT threshold; it does not establish exemption from other tax obligations.
  • Annual gross turnover above KES 25,000,000. This is outside the TOT band; the applicable income-tax obligations depend on the taxpayer and should be confirmed with KRA.
  • Income from rental property, professional services (e.g., legal, consulting, medical), management or training fees, or income subject to final withholding tax (e.g., dividends, interest)
  • A non-resident taxpayer
⚠️ Important Monitor turnover as it approaches KES 25,000,000. If you expect to exceed that limit, ask KRA or a tax adviser to confirm the applicable obligations and update your tax registration. Do not assume the administrative change is automatic or that a particular back-charge always follows.

3. TOT Rate: 1.5% of Gross Sales

Turnover Tax is charged at a flat 1.5% on gross monthly sales, exclusive of VAT. The rate applies to your total sales revenue for the month — no deductions for cost of goods sold, rent, salaries, or any other business expenses.

The Affordable Housing Act 2024 reduced the rate from 3% to 1.5% with effect from 22 March 2024. KRA’s April 2024 iTax notice says the change was applied from the March 2024 return.

How to Calculate — Real Examples

Example 1: Retail shop with KES 200,000 monthly sales

  • Monthly gross sales: KES 200,000
  • TOT due: 1.5% × KES 200,000 = KES 3,000

Example 2: Salon with KES 85,000 monthly sales

  • Monthly gross sales: KES 85,000
  • TOT due: 1.5% × KES 85,000 = KES 1,275

Example 3: Wholesaler with KES 1,500,000 monthly sales

  • Monthly gross sales: KES 1,500,000
  • TOT due: 1.5% × KES 1,500,000 = KES 22,500
💡 Pro Tip Compare your likely TOT with the regular income-tax treatment using your actual taxable income, allowable deductions, legal form, and other obligations. Company and individual tax rates apply to taxable income under different rules, so they cannot be compared directly with TOT on gross sales. Ask KRA or a qualified tax adviser to assess your circumstances.

4. How to Register for TOT on iTax

Registration is done through the KRA iTax portal. If you already have a KRA PIN, you can add TOT as an obligation type. Here's how:

  1. Log in to iTax — Visit itax.kra.go.ke and log in using your KRA PIN and password. If you don't have a KRA PIN, apply for one first.
  2. Access the Registration module — Click on Registration and select Amend PIN Details
  3. Indicate TOT preference — Under Section A (Basic Information), find the question "Do you want to register for TOT?" and select Yes
  4. Set the effective date — Under Section B (Obligation Details), select the date from which you want TOT to apply
  5. Submit the application — Review the changes and submit. The TOT obligation will be added to your iTax profile
  6. Confirmation — You'll receive confirmation on your iTax dashboard. You can now file TOT returns
⚠️ Important You must also have a registered business before you can register for TOT. If you're operating as a sole proprietor, make sure your business name registration and KRA PIN are in order before starting the TOT registration process.

5. How to File and Pay TOT

Filing TOT returns can be done through iTax (desktop) or the KRA M-Service App (mobile). Here's the standard process:

Via iTax (Desktop)

  1. Log in to itax.kra.go.ke
  2. Go to Returns → File Return → Turnover Tax
  3. Download the Excel return template — Fill in your gross sales for the month
  4. Upload the completed return and submit
  5. Go to Payments → Payment, select the amount payable, and generate a payment slip
  6. Pay via a partner bank or through M-PESA using the KRA M-Service App

Via KRA M-Service App (Mobile)

The easiest way for most small business owners:

  1. Download the KRA M-Service App from Google Play Store or Apple App Store
  2. Log in with your KRA PIN and password
  3. Select File Return → Turnover Tax
  4. Enter your gross sales for the month
  5. Review and submit the return
  6. Pay via M-PESA directly through the app

Important Filing Rules

  • Due date: Returns must be filed by the 20th of each month for the previous month's sales
  • Nil returns: If your business is subject to TOT but has no income chargeable to TOT for a tax period, you must submit a nil return under rule 7(2) of the Income Tax (Turnover Tax) Rules, 2023.
  • If you also deal in vatable supplies: Once your turnover from taxable supplies reaches KES 5 million, you must also register for VAT in addition to TOT
💡 Pro Tip Set a monthly calendar reminder for the 15th of each month — that gives you a 5-day buffer before the 20th deadline. The KRA M-Service App makes filing from your phone quick enough that you can do it during a tea break. Missing the deadline by even a day triggers the KES 1,000 penalty.

6. TOT and VAT — How They Work Together

TOT and VAT are separate obligations; a qualifying resident business can be registered for both. VAT registration alone does not exclude a business from TOT. TOT eligibility depends on the taxpayer, the annual gross-turnover band, and the statutory exclusions.

KRA says VAT registration is required when the value of taxable supplies is or is expected to be at least KES 5,000,000 in a 12-month period. Voluntary registration below that threshold is subject to KRA's conditions. The business's total turnover alone cannot show whether its taxable supplies meet the VAT threshold.

If annual gross turnover is above KES 25,000,000, the business is outside the TOT band. Confirm the resulting tax obligations and registration steps with KRA; do not infer them from VAT status alone.

7. Can You Opt Out of TOT?

Yes. If your business has high expenses relative to revenue, the regular income tax regime (where you pay tax on profit, not turnover) may work out cheaper. You can elect in writing to the Commissioner not to be taxed under TOT, in which case the normal provisions of the Income Tax Act apply.

Whether opting out is beneficial depends on your legal form, taxable income, allowable deductions, and other obligations; compare your actual circumstances with a qualified tax adviser.

This election is typically beneficial if:

  • You have significant deductible expenses that reduce your taxable profit
  • You want to carry forward losses (not allowed under TOT)

Talk to a tax professional before opting out — once you do, you'll need full accounting records and annual tax filings, which means higher compliance costs.

8. Penalties for Non-Compliance

TOT is simple, but KRA enforces it strictly. Here are the penalties:

Offence Penalty
Late filing of TOT return KES 1,000 per month (each month the return is overdue)
Late payment of TOT 5% of the unpaid tax
Interest on unpaid TOT 1% per month on principal tax due until fully paid
Failure to register for TOT when eligible Back-taxes assessed by KRA plus penalties and interest

Beyond penalties, non-compliance can trigger a KRA audit, affect your ability to get a tax compliance certificate (needed for tenders and financing), and lead to more scrutiny on all your tax affairs.

9. Frequently Asked Questions

Who is eligible for Turnover Tax in Kenya?

A resident person, including an individual, partnership, or company, falls within the numeric TOT band when annual gross turnover is more than KES 1,000,000 and does not exceed KES 25,000,000, subject to statutory exclusions. KES 1,000,000 or less is outside the TOT band but does not by itself establish exemption from other tax obligations. Turnover above KES 25,000,000 is outside the TOT band; confirm the applicable obligations with KRA.

What is the current Turnover Tax rate?

TOT is charged at 1.5% of gross monthly sales, exclusive of VAT. The Affordable Housing Act 2024 reduced the rate from 3% to 1.5% with effect from 22 March 2024; KRA applied the change from the March 2024 return onward. The annual turnover band remains above KES 1,000,000 and up to KES 25,000,000, subject to statutory exclusions.

Can I deduct business expenses from TOT?

No. TOT is charged on gross sales with no expense deductions. If your business has high operating costs relative to revenue, you may elect to opt out of TOT and be taxed under the regular income tax regime where expenses are deductible.

What is the penalty for late filing of TOT returns?

Late filing attracts a penalty of KES 1,000 per month. Late payment incurs a 5% penalty plus interest at 1% per month on the outstanding amount. File by the 20th of each month to avoid these penalties.

Do I need to file TOT returns if I made no sales?

Yes. If your business is subject to TOT but has no income chargeable to TOT for a tax period, you must submit a nil return. This is required by rule 7(2) of the Income Tax (Turnover Tax) Rules, 2023.

Related Guides

⚠️ Disclaimer: This guide is for informational purposes. TOT eligibility and VAT registration statements were checked against KRA guidance on 11 October 2026. Tax rates and thresholds can change. Verify your circumstances with KRA TOT guidance or a qualified tax adviser.

Sources and update record

The cited sources for the current TOT rate, nil-return trigger, monthly deadline, eligibility, VAT coexistence and final-tax scope were checked on 11 October 2026. Source-level dates below record when each source was checked.