Turnover Tax explained for Kenyan SMEs

## What is Turnover Tax (TOT)?

Turnover Tax (TOT) is a simplified tax regime for small and medium businesses in Kenya. Instead of paying income tax on net profit, you pay 1.5% of your gross turnover (total revenue).

TOT was reduced from 3% to 1.5% under the Finance Act 2023.

Who qualifies for TOT?

Your business must have annual turnover between KES 1,000,000 and KES 50,000,000.

Below KES 1M: Not required to register for TOT (but may need to pay income tax)

Above KES 50M: Must pay income tax or corporation tax instead

Key differences from income tax

Because TOT does not allow expense deductions, it can be more expensive than income tax if your profit margins are low. If your expenses are 60%+ of revenue, income tax may result in a lower tax bill.

Filing TOT on iTax

Log in to iTax

Click Returns > File Return > Turnover Tax

Enter your gross turnover for the month

System calculates 1.5% automatically

Pay by the 20th via M-Pesa or bank transfer

Should you choose TOT?

Consider TOT if:

Your expenses are low (high-margin consulting or services)

You want simpler record-keeping (no expense tracking required)

Your turnover is predictable

Avoid TOT if:

Your expenses are more than 50% of turnover

You have significant capital expenditures

You want to claim input VAT (TOT and VAT can coexist, but consult an expert)

Use TaxSimple's Turnover Tax calculator to compare your TOT liability against estimated income tax.