What is Presumptive tax in Kenya? How to pay, Penalties and fees

Presumptive tax was introduced in the Income Tax through the amendment of the Finance Bill of 2018.

The origin of Presumptive tax for the informal sectors in Kenya

The presumptive Tax was originally known as the TURNOVER TAX . It was introduced in the Finance Act of 2006  to target individuals in the informal sector of Kenya. While reading the 2018 Budget statement (available here), Cabinet Secretary for National Treasury Henry Rotich indicated that the TURNOVER TAX system of taxation was unsuccessful and the levels of compliance remained low due to the profile of the sector.

He therefore proposed an amendment to the Income Tax act that replaced TURNOVER TAX with PRESUMPTIVE TAX .

What is Presumptive tax in Kenya?

Presumptive tax is taxation based on the business permit or trading license fees at a rate of fifteen percent (15%).

This therefore means that if you run any kind of  business  and you have a business permit provided by the county government you fall in this group and you will have to pay a tax of 15% of the fee you pay to renew your business permit.

The Finance Bill of 2018

To learn more about the finance bill of 2018 check this page.

Penalties of failing to pay Presumptive tax

• A person who fails to pay tax on the due date shall be liable to pay a late payment penalty of twenty percent of the tax due and payable.
  Late payment of interest at a rate equal to two per cent per month or part of a month on the amount unpaid for the period until the tax is paid in full (shall also apply).
• A person liable to a late payment penalty or interest may apply in writing to the Collector for the remission of the penalty or interest payable and such application shall include the reasons for the application.
• where the amount of the penalty or interest exceeds one million five hundred thousand shillings, the collector shall seek prior approval of the Cabinet Secretary responsible for finance; and (ii) make quarterly reports to the Cabinet Secretary responsible for finance on the remissions granted

Sources

• The National Treasury (Kenya)
• Kenya Law

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