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February 19, 2019

KRA gets tough, presumptive tax to be slapped on trade fees

The KRA offices in Mombasa.FILE
The KRA offices in Mombasa.FILE

Motor cycle operators and Small scale traders are some of the taxpayers targeted to increase revenue collection in the coming financial year 2019/2020.

Others are commercial small scale farmers and individual Landlords.

According to the Kenya Revenue Authority, atleast 60 per cent of Kenyans engaged income generating activities do not pay tax.

In a country of 45 million with more than 20 million taxpayers engaged in income generating activities, less than 10 million are registered taxpayers.

As at 2015, there were 8.1 million taxpayers in the Personal Identification Number database.

This year only 3.2million filed their returns leading to a a Sh1.48 trillion tax collection or an average Sh123.93 billion a month in the year ending June 2018 against a target of Sh1.65 trillion.

To expand the tax base and increase revenue collection, KRA has announced introduction of a presumptive tax to take effect from Tuesday next week.

The tax will be charged at 15 per cent of the business permit or trade licence fee.

It was introduced in the 2018/19 financial year budget statement to replace the current turnover tax which is charged at three per cent.

“It is important to note that taxpayers who shall be having turnover tax arrears when the presumptive tax takes effect shall still be required to clear the arrears,” KRA Commissioner of Strategy, Innovation and Risk Management Mohamed Omar said.

Speaking through a press statement released yesterday, Omar said the new tax will apply to small and medium enterprises whose annual turnover is less than Sh5 million.

Businesses that offer management and professional services, incorporated companies as well as rental businesses will be exempted from paying presumptive tax.

Also exempted from this tax head are persons whose incomes are exempt from tax as stipulated in the First Schedule of the Income Tax Act.

Such, however, should be backed by valid certificates of exemption.

Taxpayers shall be required to make payment for presumptive tax at the point of obtaining and making payment for business permits or trade licenses or renewal of the same by the county governments.

Payment for presumptive tax shall be made on the iTax platform by generating a payment registration number which is payable through mobile money transfer or at any KRA partner bank.

The due date for presumptive tax is the date payment for a business permit or trade licence is made.

While KRA has confirmed that plans to roll out presumptive tax are still on course, the move has received passionate opposition from different institutions and taxpayers.

For instance, Kenya National Chamber of Commerce said the tax lacks equity as there is no consideration of turnover when the tax is charged.

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