Turnover Tax vs VAT

How the thresholds work

• Below KES 1,000,000/year: neither Turnover Tax nor VAT applies. You still need a KRA PIN and file income tax as normal.
• KES 1,000,000 to KES 25,000,000/year: you are eligible for Turnover Tax at 1.5% of gross sales, a simplified final tax with no expense deductions and no annual income tax return needed on that income. You can elect out of TOT in writing if you prefer the standard regime.
• KES 5,000,000/year and above: VAT registration becomes mandatory regardless of whether you are also on Turnover Tax. If your turnover is between KES 5,000,000 and KES 25,000,000, you may need to run both: TOT on the income tax side and VAT on qualifying sales.
• Above KES 25,000,000/year: Turnover Tax no longer applies. You move to standard corporate or individual income tax, plus VAT if you deal in vatable supplies.