Business
Turnover tax in Kenya 2026: who pays 1.5%, and when to switch to VAT
Turnover tax is 1.5% of sales for businesses turning over KES 1 million to 25 million. Who qualifies, how to file by the 20th, and how eTIMS affects you.
Turnover tax (TOT) is 1.5% of gross sales for resident businesses with turnover between KES 1 million and KES 25 million a year. You file and pay monthly, by the 20th of the following month. Once turnover passes KES 5 million in 12 months, you must register for VAT.
What turnover tax costs at different sales levels
| Monthly sales | TOT / month | TOT / year |
|---|---|---|
| KES 100,000 | KES 1,500 | KES 18,000 |
| KES 300,000 | KES 4,500 | KES 54,000 |
| KES 500,000 | KES 7,500 | KES 90,000 |
| KES 1,000,000 | KES 15,000 | KES 180,000 |
| KES 2,000,000 | KES 30,000 | KES 360,000 |
TOT is charged on sales, not profit. A shop selling KES 300,000 a month pays KES 4,500 whether it made a profit or not, which is why knowing your real margin matters.
Who can't use turnover tax
- Rental income, which has its own residential rental income tax.
- Management, professional and training fees.
- Income already taxed through final withholding tax, and non-residents.
- Businesses with turnover above KES 25 million.
VAT and eTIMS
Once your taxable sales pass KES 5 million in any 12 months, you must register for VAT at 16%. All businesses must issue invoices through KRA's eTIMS system. Since 2026, KRA checks tax returns against eTIMS data, and expenses not backed by an eTIMS invoice may not be deductible.
How to file
- Register for TOT on iTax under your PIN.
- Each month, file the TOT return and pay 1.5% of the month's gross sales by the 20th.
- Keep sales records and eTIMS invoices for at least five years.
Why TOT can hurt low-margin businesses
Because TOT is charged on sales, it takes a bigger share of profit when margins are thin. In our example shop, sales of KES 300,000 a month and a true gross margin of 25% leave a profit of about KES 30,000 after overheads, and TOT of KES 4,500 takes 15% of that profit.
| Net margin | Profit on KES 300,000 sales | TOT | TOT as share of profit |
|---|---|---|---|
| 5% | KES 15,000 | KES 4,500 | 30% |
| 10% | KES 30,000 | KES 4,500 | 15% |
| 20% | KES 60,000 | KES 4,500 | 8% |
TOT vs income tax: which is better?
For businesses with healthy margins, 1.5% of sales is often cheaper and much simpler than income tax on profit. Low-margin traders may pay less under the normal income tax system, which taxes profit after expenses. A registered tax agent can help you compare. The business tax check shows your effective rate on profit.
Records to keep
- Daily sales records, including M-Pesa till statements.
- Purchase invoices, ideally eTIMS invoices.
- Bank statements and receipts for rent and other overheads.
- Copies of every TOT return and payment slip.
Frequently asked questions
What is the turnover tax rate in Kenya?
1.5% of gross sales, since July 2023.
Who qualifies for turnover tax?
Resident businesses with annual turnover between KES 1 million and KES 25 million, except rental, professional and management income.
When is turnover tax due?
Monthly, by the 20th of the following month.
When do I need to register for VAT?
When taxable sales exceed KES 5 million in any 12-month period.
Sources
- Kenya Revenue Authority — Turnover Tax (TOT)
- Kenya Revenue Authority — Value Added Tax (VAT)
- Kenya Revenue Authority — What is eTIMS (expense rules and exemptions)
- EY — KRA to validate income and expenses in tax returns
Links are for reference only. METRIKA is independent and not affiliated with or endorsed by these organisations.
Last reviewed 1 Oct 2026. METRIKA gives estimates and general information, not financial, tax, legal or immigration advice.