How METRIKA calculates this
METRIKA works from your monthly figures, excluding VAT:
- Gross margin = (sales − cost of sales) ÷ sales. The declared margin uses your purchases figure as entered; the true margin removes any overheads you said are mixed into purchases.
- Turnover Tax = 1.5% of gross sales. It is a final tax, so no separate income tax is estimated.
- VAT = 16% of sales − 16% of purchases, assuming everything is standard-rated and backed by eTIMS invoices.
- Income tax: limited companies pay 30% of profit. Sole proprietors pay the individual annual bands (10% on the first KES 288,000, 25% on the next KES 100,000, 30% up to KES 6 million, 32.5% up to KES 9.6 million and 35% above) minus KES 28,800 personal relief. Partnerships are not taxed as a business; each partner is taxed on their share, split equally here.
The health score starts at 100 and drops for each compliance issue found and for margins below the typical range. Typical ranges are METRIKA's rough guides for comparison only. KRA does not publish margin benchmarks, and a margin outside the range does not by itself mean anything is wrong.
What to know in Kenya
KRA compares data from eTIMS invoices, VAT and income tax returns, withholding tax certificates and customs records, so figures that don't match are easy to spot. Since 1 January 2024, business expenses generally need a valid eTIMS invoice to be deductible for income tax. Exceptions include salaries and wages, imports, bank interest and charges, airline tickets, investment allowances and payments to non-residents.
Not included: withholding tax credits, instalment tax timing, capital allowances, losses carried forward, exempt and zero-rated VAT supplies, and sector-specific incentives. For filing decisions, speak to a registered tax agent.
Frequently asked questions
What is Turnover Tax in Kenya?
Turnover Tax (TOT) is 1.5% of gross monthly sales for resident businesses with annual turnover between KES 1 million and KES 25 million. It's filed and paid by the 20th of the following month. Professional services, rental income and VAT-registered businesses are among those that can't use it.
Do purchases reduce Turnover Tax?
No. Turnover Tax is charged on gross sales, so purchases and expenses don't reduce it.
When must a business register for VAT in Kenya?
You must register for VAT if your taxable supplies reach, or are expected to reach, KES 5 million in 12 months. The standard rate is 16%, and returns are due by the 20th of the following month.
Are expenses without an eTIMS invoice deductible?
Since 1 January 2024, most business expenses need a valid eTIMS invoice to be deductible for income tax. Exceptions include salaries, imports, bank interest, airline tickets, investment allowances and payments to non-residents.
Are fuel receipts deductible without an eTIMS invoice?
Fuel isn't on the list of exempt expenses, so ask the station for an eTIMS invoice with your business's KRA PIN if you want to claim it.
What is the corporate tax rate in Kenya?
Resident companies pay 30% corporate income tax on taxable profit. Branches of foreign companies also pay 30%.
What is the withholding tax on professional services in Kenya?
For residents, withholding tax is 5% on professional, management and consultancy fees and 3% on contractual fees. It must be remitted to KRA within five working days of deduction.
Can I claim capital allowances on commercial vehicles?
Yes. Motor vehicles and heavy earth-moving equipment qualify for a capital allowance of 25% a year in equal instalments, instead of being expensed when you buy them.
How is a partnership taxed in Kenya?
A partnership isn't taxed as a business. Each partner declares their share of the profit on their own income tax return.
Why would KRA flag my business?
KRA's systems compare what you declare with data from eTIMS, your customers' and suppliers' returns, withholding tax certificates and customs. Common triggers are sales lower than what customers reported buying from you, expenses without eTIMS invoices, and returns that don't match.
How do I calculate gross profit margin?
Subtract cost of sales from sales, divide by sales and multiply by 100. Cost of sales includes stock and direct costs only, not rent, salaries or other overheads.
Sources
- Kenya Revenue Authority — Turnover Tax (TOT)
- Kenya Revenue Authority — Value Added Tax (VAT)
- Kenya Revenue Authority — What is eTIMS (expense rules and exemptions)
- Kenya Revenue Authority — Withholding tax rates
- PwC Tax Summaries — Kenya corporate deductions
- PwC Tax Summaries — Kenya corporate income tax
Links are for reference only. METRIKA is independent and not affiliated with or endorsed by these organisations.
Rates checked 26 Sep 2026. METRIKA gives estimates, not financial or tax advice.