2019 Might Not Be Smooth For Kenyan SMEs as Presumptive Tax Takes Effect

As 2018 fades away, paving way for the much-awaited 2019, Kenyan small medium enterprises (SMEs) might find it hard to cope with the environment as presumptive tax takes effect.

In accordance with the Finance Act, 2018, small businesses are to start paying the presumptive tax from 1st of January 2019.

“Persons acquiring or renewing a business permit or license at the County shall pay this tax at the rate of 15 percent of the business permit fee or license payable,” said the Kenya Revenue Authority in a notice to the public.

The presumptive tax according to the Finance Act shall only apply where the turnover from business is less than five million shillings per year.

“The tax does not apply to persons engaged in management or professional services, rental businesses, and incorporated companies,” said KRA in a statement.

Some of the taxes that Kenyans are either paying or will soon start paying include the VAT on petroleum products which was at 16 percent but reduced to 8 percent by President Uhuru Kenyatta. Kenyans are already paying this increase on fuel with the price of kerosene being at the same level as that of diesel.

Salaried Kenyans will also start “contributing” towards the National Housing Development Fund (NHDF) where all employees and employers are to each contribute 1.5 percent of employee’s gross monthly earnings up to a maximum of 5,000 shillings. The guidelines of how the “contributions” will be made are yet to be issued.

Nonresidential persons, will start paying withholding tax on demurrage and insurance premiums that shall be at the rate of 20 percent and 5 percent for the demurrage and insurance premiums respectively.