Turnover tax or VAT for a small Kenyan studio
The turnover tax band and the VAT registration point for a small Kenyan fitness or yoga studio, and how its own books give the sales figures behind both.
By Achekam · · 5 min read · For Fitness businesses in Kenya
A yoga studio in Kilimani, a boxing gym in Mombasa, a Pilates room above a shop in Nakuru: small fitness businesses in Kenya grow class by class, and at some point the owner realises that "we'll sort the tax out later" has become now. The question is usually framed as a choice: turnover tax or VAT?
In practice it is two separate tests, each driven by a sales figure, and the studio needs those figures from its own books rather than from memory. This article sets out both tests as they stand at the time of writing, how a studio's books in Achekam produce the numbers, and what Achekam will and will not compute for you.
The turnover tax band
Kenyan turnover tax applies to resident businesses whose gross turnover is above KES 1 million and not above KES 25 million. KRA gives the rate as 1.5% of gross sales. Rates in Kenya have changed with Finance Acts before, so confirm the current rate on KRA's own page before you file.
Two things follow for a studio:
- It is charged on sales, not profit. A month where the studio paid for new mats, a sound system and an instructor's training still carries turnover tax on everything it sold. Costs do not reduce it.
- Below the band, turnover tax does not apply. A very small studio below KES 1 million should ask its adviser what applies instead rather than assume it owes nothing.
KRA's turnover tax page sets out who falls under the tax, the current rate on gross sales, opting out, exempt income, why no expenses are deductible and how to register on iTax. Read it with your studio's own income streams in mind.
When VAT registration comes into it
The VAT test is separate. A business in Kenya must apply for VAT registration within 30 days once its taxable supplies reach KES 5 million in 12 months. That is a rolling test: any run of twelve months counts, not only your financial year.
Because the VAT point sits inside the turnover tax band, a growing studio can meet the VAT test while its turnover is still within the band. How KRA treats a studio in that position, and whether turnover tax continues alongside VAT, is a question to settle with KRA's guidance and your tax adviser before you cross the line, not after. What you can do yourself is watch the figure, month by month, so the 30 days do not start without you noticing.
Sales figures from your own books
Both tests need a clean sales figure, and a studio's income usually arrives several ways at once: monthly memberships, class packs, drop-in classes, personal training, and drinks or merchandise at the desk, paid by M-Pesa, card or cash.
In Achekam those streams reach the ledger by two routes:
- Invoices. Issuing an invoice posts it as debtors, sales and output VAT. Membership and personal-training invoices land in sales this way.
- The till. With the Point of Sale add-on, every till sale that reaches the server posts its own journal, with M-Pesa to its own account and the sale to revenue.
Management accounts then show an income statement for any chosen period beside the period before, added up from the studio's own journals, and export as PDF or CSV. Two habits make them useful for tax:
- Pick the period yourself. The year-to-date preset starts on 1 January, not your own year start. For the rolling VAT test, set a custom period covering the last twelve months and read total sales.
- Read every revenue line. Turnover tax is on gross sales, so add up all income accounts, including till revenue and invoice revenue, not just the one you think of as "memberships".
One limit to keep in mind: at the time of writing, the ledger screens show every amount in rand, and the chart of accounts is stored in ZAR, even for a Kenyan business. Read the totals as the shilling amounts you posted, and keep that in mind when you export.
A worked example in words: at the end of each month the owner opens management accounts for the trailing twelve months, notes the total of every revenue line, and writes it in a simple log beside the date. Each quarter the same figure for the year so far goes to the bookkeeper for turnover tax. The day the trailing figure approaches the VAT point, the owner calls the adviser.
Tax codes once you are registered for VAT
When the studio registers for VAT, its invoices change. A Kenyan business picks a tax code on each invoice line: standard, zero-rated, exempt, out of scope or reverse charge. Only standard lines carry VAT, at the approved Kenyan rate. This applies once the Kenya country pack is activated under Settings, Jurisdiction & regulators.
Use the invoice form under Accounting for this. The New invoice form under Billing & Finance offers only 15% or 0% VAT and shows rand, so it does not follow Kenyan VAT.
What Achekam computes, and when
Once its rules are approved, Achekam computes Kenyan corporation tax, instalment tax, VAT, withholding tax, turnover tax, capital gains tax and stamp duty. The condition matters. Every Kenyan tax figure in Achekam's rule book was loaded under review, and Achekam computes nothing from a figure until an Achekam platform administrator approves it. Where no approved rule applies on a document's date, Achekam refuses rather than assumes a rate.
So, at the time of writing:
- If the Kenyan rules your studio needs have been approved, Achekam can compute the tax from your books.
- If they have not, a standard-rated invoice line can be refused, and the turnover tax figure is worked out by you or your bookkeeper from the management accounts, then filed on iTax.
For more on what happens while Kenyan and Nigerian rates wait for approval, read VAT while rates await approval. If you are still setting the studio up, setting up a new gym's books covers the order of things before opening day.
A short checklist for the owner
- Know your trailing twelve-month sales figure every month.
- Count every income stream, from class packs to bottled water.
- Confirm the turnover tax rate on KRA's page before each filing.
- Ask your adviser how turnover tax and VAT interact before you reach the VAT point.
- When registered, switch to tax codes on the Accounting invoice form.
The tax question gets simpler once the sales figure is never in doubt. Keep every stream in the books, read the trailing total each month, and take the VAT conversation to your adviser while there is still time to plan it.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
