The Finance Act, 2018 (the Act) has introduced a presumptive tax on resident persons with an annual turnover that is below Kes.5,000,000. This replaces the existing turnover tax. The tax applies to persons issued or liable to be issued with a business permit or a trade license by a county government in a year of income. The tax does not apply to income from management or professional services, rental income or incorporated entities. The tax is payable at 15% for the amount payable for a business permit or trade license. The tax will be due at the time of payment of the business permit or trade license or renewal of the same.
The tax seems to be geared towards the Governments objective of expanding its tax base through taxation of the informal sector.
The tax-payers under the presumptive tax regime are not required to file a tax return on the income from the business that qualifies under presumptive tax regime.
Presumptive tax is a final tax. This means, a tax-payer is not required to declare the tax in the tax-payer's Annual Tax Returns.
The effective date of the tax was intended to be 1 January 2019. This is subject, however, to the Government's compliance with certain provisions of the Constitution.