Turnover Tax in Kenya 2026: Who Pays, the 1.5% Rate and How to File
A simple tax for small businesses turning over KES 1 million to KES 25 million a year -- how it works, when it is due and when to choose something else.
Small businesses in Kenya often avoid tax because they assume it means complex bookkeeping. Turnover Tax (TOT) was designed for exactly them: a flat percentage of sales, filed monthly, with no need to calculate profit. Here is how it works in 2026.
The Basics
| Item | Rule |
|---|---|
| Rate | 1.5% of gross monthly sales |
| Who qualifies | Resident individuals, partnerships and companies with annual turnover above KES 1 million and not exceeding KES 25 million |
| Filing | Monthly on iTax |
| Due date | By the 20th of the following month |
| Not covered | Rental income, management, professional and training fees, employment income, and income already subject to a final withholding tax |
How the Calculation Works
TOT is charged on gross sales, not profit. If your shop sells KES 300,000 worth of goods in March, your TOT for March is 1.5% x 300,000 = KES 4,500, due by 20 April. Expenses are not deducted. That simplicity is the point — but it also means TOT can be expensive for low-margin businesses.
Is TOT Right for Your Business?
TOT suits businesses with healthy margins and simple records — salons, kiosks, small retail shops, boutiques, food joints. It is a poor fit for high-volume, low-margin trading, where 1.5% of sales could be a large slice of a thin profit. Those businesses may prefer to elect out of TOT and file normal income tax on actual profit, which requires proper books. If you expect to exceed KES 5 million in taxable supplies, you must also register for VAT (16%), and VAT-registered businesses are taxed under the normal regime.
How to File TOT on iTax
- Ensure TOT is added as a tax obligation on your KRA PIN (you can request this on iTax).
- Log in to iTax and go to Returns, then File Return.
- Select Turnover Tax and the month.
- Enter gross sales for the month; the tax is computed.
- Submit, generate the payment slip and pay via M-Pesa (KRA paybill 222222) or bank.
If you had no sales in a month, file a nil return anyway to avoid penalties.
eTIMS Still Applies
Even on TOT, your sales invoices should be issued through KRA's eTIMS system, and your customers need eTIMS invoices to claim your sales as their business expenses. Our eTIMS registration guide covers the free options for small businesses, including eTIMS on USSD.
Worked Example: A Year on TOT
Amina runs a boutique in Thika with sales of about KES 250,000 a month, or KES 3 million a year.
| Month | Gross sales | TOT at 1.5% | Due date |
|---|---|---|---|
| January | KES 230,000 | KES 3,450 | 20 February |
| February | KES 210,000 | KES 3,150 | 20 March |
| March | KES 280,000 | KES 4,200 | 20 April |
| Full year | KES 3,000,000 | KES 45,000 | Monthly by the 20th |
If Amina's profit margin is 30%, her annual profit is about KES 900,000, and KES 45,000 in TOT is about 5% of profit — simple and affordable. A business with a 3% margin on the same sales would pay TOT equal to half its profit, which is why low-margin traders should take advice.
TOT vs Income Tax on Profit
| Feature | Turnover Tax | Normal income tax |
|---|---|---|
| Based on | Gross sales | Profit after expenses |
| Rate | 1.5% | Individual bands up to 35%, or corporate rate for companies |
| Filing | Monthly | Annual, with instalment tax |
| Records needed | Sales records | Full books of account |
| Best for | Healthy-margin small businesses | Low-margin or loss-making businesses |
Records You Should Keep
Even on TOT, keep a daily sales record, eTIMS invoices, M-Pesa and bank statements, purchase receipts and stock records. KRA can audit small businesses, and good records protect you if your declared sales are questioned. They also make it far easier to get a SACCO or bank loan.
Turnover Tax -- FAQ
What is the turnover tax rate in Kenya?
1.5% of gross sales, for businesses with annual turnover between KES 1 million and KES 25 million.
When is turnover tax due?
Monthly, by the 20th of the following month, filed and paid through iTax.
Can I deduct expenses under TOT?
No. TOT is charged on gross sales. If you want to deduct expenses, you need to file normal income tax on profit instead.
What happens if my turnover goes above KES 25 million?
You move out of Turnover Tax into the normal income tax regime and, if taxable supplies exceed KES 5 million, you should already be registered for VAT.
Do I pay TOT if I made a loss?
Yes. TOT is charged on gross sales regardless of profit, which is why loss-making or low-margin businesses may prefer normal income tax.
Can a limited company pay Turnover Tax?
Yes, a resident company whose turnover falls within the KES 1 million to KES 25 million band can be under Turnover Tax, unless it is excluded by the rules or has chosen the normal regime.
Do I need an accountant for Turnover Tax?
Many small businesses file TOT themselves on iTax. An accountant is useful if you are unsure whether TOT suits your margins, or you also have VAT, PAYE or rental income.
Final Thoughts
Turnover Tax keeps tax compliance simple for small Kenyan businesses: 1.5% of sales, filed by the 20th. Check that it suits your margins, stay on top of eTIMS, and file every month — even with zero sales — to keep your record clean.