3% turnover tax for small businesses inside the ToT band.
Turnover tax (annual)
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Monthly ToT
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Band status
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A flat tax built for the small trader
Turnover tax, or ToT, is Kenya's simplified tax for businesses that are too big to ignore but too small to wrestle with full accounts. Instead of working out profit, subtracting costs, and applying graduated income tax bands, you pay a single percentage of every shilling that comes through the till. The rate this calculator applies is 3 percent of gross turnover, with no deduction for rent, stock, salaries, or any other expense. That is the whole appeal: a hawker, a small online seller, or a neighbourhood shop can compute the tax on the back of a receipt book.
Eligibility is defined by a turnover band, not by what you do for a living. As modelled here, ToT applies to resident persons whose annual turnover sits between KES 1 million and KES 25 million. Cross below the floor and you fall out of the regime entirely, which the tool flags as exempt. Cross above the ceiling and you graduate to the normal income tax or corporation tax system, where expenses are deductible but the paperwork is heavier. The Kenya Revenue Authority administers ToT on a monthly cycle, so the headline annual figure here is really twelve smaller payments.
Where the 3 percent comes from, and why it keeps moving
The structure of turnover tax has been stable for years, but the numbers attached to it have not. The rate sat at 1 percent when the regime was reintroduced, then moved to 3 percent under a later Finance Act, and the turnover band itself has been redrawn more than once. Because Kenya passes a Finance Act almost every year, usually taking effect on 1 July, any specific figure can shift between filing seasons. Treat the 3 percent rate and the KES 1 million to KES 25 million band as the values this calculator uses for the current period, and confirm the live position on the KRA website before you file. The teaching point that does not change is the trade you are making: simplicity and a low headline rate in exchange for losing every expense deduction.
A KES 4.8 million shop, taxed step by step
Take a small retailer with annual turnover of KES 4.8 million. That figure sits comfortably inside the band, so ToT applies. Using the rate this calculator applies, the maths is deliberately blunt.
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The chart below shows why margin matters so much under ToT. The tax is fixed at KES 144,000 whatever your costs are, so a thin-margin trader keeps almost nothing while a fat-margin trader keeps plenty. The grey bar is turnover, the dark slice is the flat ToT bill, and the teal bar is what remains before other costs.
A practical tip. ToT is calculated on turnover, so it is brutal when your margins are slim. If you buy goods at KES 95 and sell at KES 100, the 3 percent ToT eats a large share of that KES 5 of gross profit. Low-margin distributors and resellers should run the comparison against the normal regime before assuming the simple option is the cheaper one.
Does turnover tax replace VAT?
No. They are separate taxes with separate thresholds. ToT is a tax on your income side, while VAT is charged on supplies once you are VAT registered, which becomes compulsory above the KES 5 million turnover mark the KRA references. A trader well inside the ToT band but below the VAT threshold may pay ToT and no VAT at all. Confirm both thresholds with the KRA, because each can move independently.
What happens if my turnover grows past KES 25 million mid-year?
Once your annual turnover exceeds the ceiling this calculator uses, you move out of ToT and into the standard income tax or corporation tax regime, where you compute tax on actual profit and can deduct expenses. The practical mistake is leaving the switch too late and filing under the wrong regime. Watch your rolling twelve-month figure and speak to the KRA or a tax agent as you approach the limit.
Is there a minimum turnover tax if I make a loss?
ToT does not care whether you made a profit or a loss, because it is charged on turnover rather than on net income. A loss-making month with sales still attracts the 3 percent. That is the central downside of the regime, and the reason a struggling business with high costs is often better off under normal income tax, where a loss can wipe out the tax bill entirely.