KRA mulls mobile payments to cure turnover tax headache

Kenya Revenue Authority (KRA) officers Emily Wairimu (right) and Caroline Lagat (second right) assist staff of Lang’ata Women’s Prison file their annual tax returns.

Kenya Revenue Authority (KRA) has less than six months to raise Sh25 billion from small businesses through the re-introduced turnover tax.

The target needs to be met by the close of the 2019/20 financial year on June 30.

KRA is racing against time to put in place structures to enable it implement the new tax, including setting up a mobile payment module by end of this month.

Wanja Wang’ondu, a tax expert at KRA’s taxpayer services and tax-base expansion office, told The Standard that they are targeting an additional 520,000 businesses with the turnover tax.

Turnover tax will be charged at three per cent of small businesses’ monthly sales.

The simplified tax, which requires businesses to only keep record of sales, targets enterprises with annual turnover of less than Sh5 million.

Even as the government re-introduced turnover tax, it retained the presumptive tax where small businesses pay 15 per cent of the trade licence fee they are charged by counties.

Online shops

Ms Wang’ondu said presumptive tax will apply to licensed businesses with permanent structures. However, the presumptive tax payment can be offset using the turnover tax payment.

“You need to claim presumptive tax until it gets exhausted,” she said.

Businesses without a permanent structure, such as online shops, will be required to pay only turnover tax, said Wang’ondu.

Since its introduction in 2005, there have been only 10,000 businesses registered for turnover tax, prompting the National Treasury to suspend it in the 2018/19 financial year.

Presumptive tax, which replaced turnover in the last financial year, also had teething problems.

Primary among the challenges was the requirement by counties that payment be one-off for both licences and the tax. 

“Numbers of businesses registered for turnover were high at first and then dropped off,” said Wang’ondu.

A survey done in 2016 by the Kenya National Bureau of Statistics established that there were about 1.56 million licensed micro and small enterprises, and 5.85 million unlicensed ones.

KRA is yet to iron out the issues it had with counties, with Wang’ondu saying they will be collaborating with the devolved units to implement the turnover tax.

The authority will also rely on data and business associations.

Late filing of turnover tax will attract a fine of Sh5,000 while late payment will be penalised at five per cent of tax due and interest of one per cent.