Have you registered your small business in Kenya? If yes, you probably have a PIN (Private Identification Number) for your company if it is registered as a limited company. However, if you have registered it as a partnership or sole proprietorship, the business’s taxes will pass through your individual tax returns.
Now that you are running a business, are you aware of the necessary taxes and their deadlines? Even if you have an accountant handling your business finances, you should know when the taxes are due. It helps in the financial planning of your business.
The Kenya Revenue Authority (KRA) uses the iTax platform for filing any taxes. Once you have your PIN, you have to log in and set your iTax password. You will be using this platform for all direct and indirect taxes.
7 Key Tax Deadlines For Your Kenyan Business
1. Pay As You Earn (PAYE)
PAYE is a way of collecting taxes at the point of employment from those who are gainfully employed. Partnerships and companies with employees must deduct tax at the applicable rate from their salaries. Then, you must file and deposit the same to the KRA on or before the 9th of the following month.
PAYE returns are submitted electronically via itax. If you have registered PAYE for your company but don’t have employees at any particular month, remember to file nil returns.
Find more about Statutory Payroll Deductions For Employers In Kenya
2. Withholding Tax (WHT)
Withholding Tax is tax businesses deduct from various income classes when making payments to non-employees. WHT is deducted at the point of income from the following sources:
- Fees for management or professionals (including agency consultancy or contractual fees)
- Additional payments specified
You must pay any money your business withholds from payments by the 20th day of the following month. As usual, you must first file the return on iTax before paying through the bank. Both the Withholdee and Withholder will receive an email withholding certificate upon successful payment of the Withholding Tax.
3. Corporation Tax
Corporation tax is income tax is imposed on corporate entities such as limited liability corporations, trusts, and co-operatives based on their annual revenue. It is also applicable to companies outside Kenya that operate or have a Kenyan subsidiary. It is paid on income earned in Kenya exclusively. The applicable rates are 30% for residents and 37.5% for non-residents.
Once you have closed the previous year and the business financials are ready, proceed to iTax and submit the Income Tax Company Return (IT2C Form) on or before the sixth month following the end of an accounting period.
For example, a business with an accounting period of 1 January to 31 December is permitted to file its Income Tax – Company Returns up to 30 June of the following year. However, if you have a tax liability for this period, the deadline for filing and paying that liability is April 30th of the following year.
Filing a return after six months is subject to a penalty. The Return covers a fiscal year, that’s 12 months during which the organization decides to prepare its financial statements.
Related read: It’s Tax Season: Year-End Accounting Checklist
4. Tax on Turnover (TOT)
Turnover Tax (TOT) is the Tax levied on a business’s gross sales. It is paid by resident individuals and companies whose gross revenue is more than Kshs. One million but not more than Kshs. 50,000,000 in a year.
TOT does not apply to the following:
- Individuals with an annual business income of less than Kshs. 1,000,000 and greater than Kshs. 50,000,000
- Rental Revenue,
- Fees for management, professional services, and training
- Income subject to the withholding tax according to the Income Tax Act
Turnover Tax is 1% of gross monthly sales. It’s filed and paid monthly on or before the 20th day of the following month.
5. Value Added Tax (VAT)
VAT is levied on the supply of taxable products and services manufactured or provided in Kenya and the importation of taxable services and goods into Kenya. While businesses and partnerships can register for VAT voluntarily, they must do so if their annual income exceeds Kshs. 5,000,000. KRA appoints agents who withhold and remit VAT on the supplies made to ensure compliance. You can verify these agents through iTax’s agent checker.
VAT is taxed at two different rates. The standard tax rate is 16%, which applies to taxable products and taxable services. In addition, an 8% tax is levied on petroleum products except for liquefied petroleum gas. Certain commodities are free from VAT, as defined in the VAT Act, 2013.
VAT returns must be filed electronically via iTax by the 20th of the following month, using the VAT3 Return form. After filing your tax returns online, obtain a payment slip for outstanding tax and make payment to one of the KRA’s designated banks or use a mobile money transfer system.
Learn more about Common Tax Deductions For Small Businesses
6. Excise Duty
This is an excise charge on items made or imported into Kenya, as described in the first schedule of the Excise Duty Act, 2015. In addition, corporations and partnerships that deal in excisable products and services pay excise duty.
Import excise duty is payable at the point of entry. Domestic excise duty must be paid by the 20th day of the following month. First, create a payment slip using iTax, then present it to a KRA’s appointed bank to complete the transaction.
7. Betting Tax
Betting Tax is levied on a bookmaker’s gross gaming revenue (GGR). Businesses engaged in Betting, gaming, and lottery are obligated to withhold and pay KRA 20% of winnings received to winners. In addition, Betting is subject to excise duty at a rate of 7.5 percent of the amount gambled or staked.
You must pay betting Tax on or before the 20th day of the following month. Create an online payment slip via iTax to pay at one of the KRA’s designated banks.
So, is your business compliant with all the taxes? Failure to file or pay any applicable taxes can lead to unnecessary running with KRA. As much as it is important to stay ahead and know what taxes to pay, it is also important that you work with a professional tax accountant. They will ensure that the information you provide to KRA when filing taxes is accurate.