KRA Waives Presumptive Tax For New Businesses

Kenyans struggling to startup businesses during these harsh COVID-19 economic times have all reasons to smile as the Kenya Revenue Authority (KRA) waives presumptive tax for new businesses in their first 24 months of operations.

The KRA has waived the presumptive tax as part of the measures to simplify tax payments to ease business costs especially now that the unemployment rate keeps climbing following continued business closure.

The presumptive tax represents a simplified tax regime for SMEs which is charged at 15 percent of the value of a single business permit issued by a County Government and applies to businesses whose turnover does not exceed Ksh.5 million.

The tax is however offset against the turnover tax payable which is presently calculated at one percent of the businesses yearly sales.

This means that businesses have from this year recovered the presumptive tax paid as it is deducted from turnover tax due.

The 2020 Tax (Amendments) Act lowered the effective turnover tax rate from three to one percent effective in April lowering the overall tax paid by SMEs in the country.

The KRA notice also indicated the waiver of the Nairobi County Single Business Permit however, it wasn’t specified whether the waiver was to apply to other businesses in the other 46 Counties.

Tax payments have been simplified further with the introduction of online filing of deductions made to the National Social Security Fund (NSSF) and the separation of payments for Capital Gains and Stamp Duty which was previously twinned. The amendment of the tax return filed online is allowed while the National Industrial Training (NITA) levy has made annual and payable on i Tax.

The new measures are aligned to KRA’s recent automation of tax payment particularly by small and medium enterprises (SMEs) which allows the settlement of pending tax arrears through mobile phones.

Current data shows that Kenyans have been registering over 326 businesses on a daily basis in the three months to September in an essence of striving through the COVID-19 survival race that pushed dozens into unemployment.

Data from the companies’ registry shows that the number of business names registered between July and September jumped 95 percent to 29,941 compared to a similar period last year.

The 95 percent rise in business registration in the quarter to September is substantial compared to the 4.3 percent recorded in the same period of 2019 and 3.7 percent in 2018.

According to stats, Kenyans registered an additional 9,649 companies between July and September translating to an average of 326 new registrations daily.

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