Presumptive tax is an advance tax subjected to businesses that do not make sales of more than Kshs. 5,000,000 per year. This tax is applicable to the following;

  1. Residents or businesses whose gross sales do not exceed Kshs. 5 million.
  2. Businesses that have been issued with a valid business permit or trade license by a county government.

However the following are exempted from this tax;

  1. An individual whose income is exempt from tax under the First Schedule of Income Tax and has a valid exemption certificate. Certain income exempt from tax, Taxes exempt under schedule I
  2. A person qualifying for presumptive tax but willingly and voluntarily chooses by notice in writing to the Commissioner not to be subjected to Presumptive Tax.
  • A resident person or business whose gross turnover exceeds Kshs. 5million.
  1. Management and professional services, rental businesses, incorporated companies, VAT registered businesses, all non-resident persons and businesses

Presumptive tax will be payable when acquiring or renewing business permits and licenses. This tax affects businesses with an annual turnover of less than Kshs. 5,000,000. Rate applicable shall be equal to 15% of the amount paid for a permit or license issued by county governments.

Illustration;   John has a barbershop and pays Kshs. 40,000 every year for his business permit. Therefore   his presumptive tax this year will amount to Kshs. 6,000 (0.15*40,000)

Necessary Facts:

Payment Method –    Log in to iTax

–    Click on Payment Registration

–    Select Presumptive Tax

–    Fill in the necessary details required ( B/s Registration Number, B/s Name, Yearly Turnover, Business Permit Value Payable)

–    Generate a payment slip

–    Pay through MPESA Paybill No. 572572 using the Payment Registration Number as the account number.

Paying the Presumptive Tax

 

Filing of Returns –    Presumptive Tax is a final tax and therefore there is no requirement to file a tax return.

 

De-registration –    One must write to the commissioner of income tax requesting de-registration once the business annual turnover exceeds Kshs. 5million.

 

Our Opinion; “This is a move to expand the tax base by tapping into the informal sector as well as leverage on the county governments to enhance collections”