Presumptive Tax
Fixed annual tax for micro and small businesses. Simple, affordable tax system for enterprises with annual turnover under KSh 1 million. Perfect for informal sector businesses and startups.
What is Presumptive Tax?
Understanding Kenya's micro business tax system
Presumptive Tax is a simplified tax system designed for micro and small enterprises with annual turnover not exceeding KSh 1 million. Instead of complex income tax calculations, eligible businesses pay predetermined fixed amounts based on their business type and location. This system recognizes the challenges faced by small businesses and provides an affordable path to tax compliance.
Who Qualifies?
Micro and small businesses with annual turnover under KSh 1 million including small shops, kiosks, salons, tailors, artisans, and informal sector enterprises.
Fixed Amounts
Pay predetermined annual amounts ranging from KSh 3,000 to KSh 30,000 based on your business type and location - no complex calculations required.
Annual Payment
Simple annual payment system with no monthly filing requirements. Pay once per year and focus on growing your business without complex compliance.
Compliance Protection
Gain legal recognition and protection while maintaining good standing with KRA. Build credibility for business growth and access to formal sector opportunities.
Find Your Presumptive Tax Rate
Select your business type and location to determine your annual presumptive tax amount. Rates are fixed and predetermined by KRA based on business category and area.
Presumptive Tax Rates 2024
Complete rate schedule by business type and location
Urban Areas (Major Cities)
| Business Type | Annual Rate (KSh) |
|---|---|
| Retail Shop/Kiosk | 15,000 |
| Wholesale Trade | 25,000 |
| Small Manufacturing | 20,000 |
| Restaurant/Eatery | 18,000 |
| Salon/Barbershop | 12,000 |
| Tailoring/Clothing | 10,000 |
| Repair Services | 8,000 |
| Transport Services | 22,000 |
| ICT Services | 15,000 |
| General Services | 12,000 |
Rural & Municipal Areas
| Business Type | Annual Rate (KSh) |
|---|---|
| Retail Shop/Kiosk | 8,000 |
| Wholesale Trade | 15,000 |
| Small Manufacturing | 12,000 |
| Restaurant/Eatery | 10,000 |
| Salon/Barbershop | 6,000 |
| Tailoring/Clothing | 5,000 |
| Repair Services | 4,000 |
| Agriculture/Farming | 3,000 |
| Artisan/Crafts | 4,500 |
| General Services | 6,000 |
Important Rate Information
- Fixed Amounts: Rates are predetermined and do not change based on actual income
- Location Based: Urban areas typically have higher rates than rural areas
- Annual Payment: Full amount payable once per year, no monthly installments
- Turnover Limit: Only businesses with annual turnover under KSh 1M qualify
- No Deductions: Fixed rates with no allowance for business expenses
Eligible Business Types
Common micro businesses that qualify for presumptive tax
Benefits of Presumptive Tax
Why choose presumptive tax for your micro business
Affordable Compliance
Fixed annual amounts starting from as low as KSh 3,000 make tax compliance affordable for micro businesses. No complex calculations or varying amounts based on income fluctuations.
Simple Administration
No monthly filing requirements, no complex record-keeping, and no quarterly payments. Pay once annually and focus on growing your business throughout the year.
Legal Protection
Gain legal recognition and protection for your business. Comply with tax obligations and build credibility with customers, suppliers, and financial institutions.
Business Growth
Formalize your business operations and access opportunities for growth. Qualify for business loans, government contracts, and formal sector partnerships.
Government Support
Access government programs and support initiatives designed for compliant small businesses. Benefit from capacity building, training, and development opportunities.
Market Access
Participate in formal markets and supply chains. Many large companies and institutions require suppliers to be tax compliant before doing business.
How to Register & Pay
Simple steps to get started with presumptive tax
Get KRA PIN
If you don't have one, register for a KRA PIN at any Huduma Centre or online through the KRA iTax portal. This is your unique taxpayer identification number.
Choose Business Registration
Register your business name if desired (optional for presumptive tax) and obtain any required licenses for your business type from relevant authorities.
Apply for Presumptive Tax
Visit your nearest KRA office or apply online through iTax portal. Submit application with business details, location, and estimated annual turnover under KSh 1 million.
Receive Assessment
KRA will assess your business and determine the fixed annual amount based on your business type and location. You'll receive a demand notice with the exact amount.
Make Annual Payment
Pay the assessed amount annually through bank, mobile money, or KRA approved payment methods. Keep payment receipts as proof of compliance.
Maintain Compliance
Keep basic business records and ensure annual turnover doesn't exceed KSh 1 million. If it does, notify KRA and migrate to appropriate tax system.
Important Payment Information
Common Issues & Solutions
Avoid these common presumptive tax mistakes
Exceeding Turnover Limit
Growing beyond KSh 1 million annual turnover while remaining on presumptive tax can lead to penalties and forced migration to other tax systems.
Solution: Monitor turnover closely and notify KRA when approaching the KSh 1M threshold.
Late Payment
Missing annual payment deadlines attracts penalties of 25% of tax due plus monthly interest charges, significantly increasing the cost.
Solution: Set annual reminders and pay early to avoid deadlines and processing delays.
Wrong Business Category
Incorrect business categorization can lead to wrong tax assessments, either overpaying or underpaying the required amount.
Solution: Consult KRA officers to ensure correct business classification and assessment.
No Business Records
Lack of basic business records makes it difficult to track turnover and can cause problems during KRA audits or when migrating to other tax systems.
Solution: Maintain simple daily sales records and annual turnover summaries for reference.
Frequently Asked Questions
Expert answers to common presumptive tax questions
Can I switch from individual income tax to presumptive tax?
Yes, if your annual turnover is under KSh 1 million and your business type qualifies, you can apply to migrate from individual income tax to presumptive tax. Submit an application to KRA with your turnover details and business information. The change typically takes effect from the beginning of the next tax year.
What happens if my business grows beyond KSh 1 million turnover?
Once your annual turnover exceeds KSh 1 million, you must notify KRA immediately and migrate to either Turnover Tax (for turnover between KSh 1M-50M) or Individual Income Tax/Corporation Tax. Failure to migrate can result in penalties and back-taxes. Keep good records to track when you approach this threshold.
Do I need to file any returns under presumptive tax?
Generally, no monthly or quarterly returns are required under presumptive tax. You simply pay the assessed annual amount. However, you should maintain basic business records and may need to provide turnover information when renewing your presumptive tax assessment or if requested by KRA during audits.
Can I claim business expenses under presumptive tax?
No, presumptive tax is a fixed amount regardless of your business expenses. The fixed rate is set with the assumption that it covers your tax liability considering typical business costs. This is the trade-off for the simplified system - you get predictable tax costs but cannot reduce the amount through expense deductions.
Can I have multiple businesses under presumptive tax?
If you operate multiple businesses, each qualifying business may be assessed separately for presumptive tax, but the combined turnover of all businesses must not exceed KSh 1 million annually. If the total exceeds this limit, you'll need to migrate to a different tax system that covers all your business activities.
How often do presumptive tax rates change?
Presumptive tax rates are reviewed periodically by KRA, typically every few years. Changes are usually announced in advance and take effect from the beginning of a tax year. Rate changes consider inflation, business environment changes, and the need to keep the system affordable for micro businesses while ensuring adequate tax collection.