Turnover tax for small Kenyan clients
Which small Kenyan businesses pay turnover tax on gross sales, and how Achekam prepares a client's return once its Kenyan rules are approved.
By Achekam · · 4 min read · For Accountants & audit firms in Kenya
Small clients are where a Kenyan practice spends a surprising share of its tax time. The hardware shop, the salon, the boda boda spares dealer and the small caterer rarely keep full books, often mix personal and business money, and need their tax worked out from whatever records they have. For many of them the relevant tax is not corporation tax on profit but turnover tax on sales.
This article covers who falls within turnover tax at the time of writing, how it is worked out, and how a firm sets up and runs a client's turnover tax return in Achekam. One limit comes first: Achekam computes no Kenyan tax figure until its rules have been approved by Achekam's platform administrators.
Who is in turnover tax at the time of writing
Kenyan turnover tax applies to resident businesses with annual turnover above KES 1 million and not above KES 25 million. KRA's turnover tax page gives the rate as 1.5% of gross sales. Finance Acts have changed this rate before, so confirm it there before each return.
That band is the starting point, not the whole test. KRA's own published guide to turnover tax sets out who is in and who is out, and it is worth reading for each new small client rather than assuming the turnover figure settles the question.
Two other obligations often meet turnover tax clients:
- VAT registration. A business must apply for VAT registration within 30 days once its taxable supplies reach KES 5 million in 12 months. A client growing through the turnover tax band can cross that line well before it leaves the band, so check its VAT position and how KRA treats it alongside turnover tax.
- eTIMS. Under the Tax Procedures Act s.23A, every business in Kenya must issue electronic tax invoices through KRA's eTIMS system and keep stock records. Small size does not remove that duty.
The rate is on gross sales
Turnover tax is charged on gross sales, not on profit. Two clients with the same sales pay the same turnover tax even if one makes a healthy margin and the other barely breaks even. That makes the sales figure everything. A client who banks some takings and keeps the rest as cash, or who sells partly through M-Pesa and partly on account, needs all of those streams in the figure.
A worked example in words: a small caterer invoices corporate clients, takes M-Pesa payments at events and receives some cash. The gross sales for the period are the total of all three, before any costs. The tax is the turnover tax rate applied to that total. Costs such as food, staff and transport do not reduce it.
A client's tax profile and return in Achekam
Staff open a Kenyan tax profile for the client under TAX & SARS > Revenue Service Centre (KE), and start returns from there. Because the client's books are not linked to this part of Achekam, the client's sales and purchase lines are typed in. For turnover tax that means entering the sales the client has evidenced, which is a good moment to check them against bank and M-Pesa statements.
Payments are recorded with the authority's own reference and receipt, which in Kenya is the PRN, and a second person confirms each one. Achekam never generates a payment reference and refuses Kenya's discontinued paybill 572572. Achekam does not pay the tax.
Nothing computed until the rules are approved
Once its rules are approved, Achekam computes Kenyan corporation tax, instalment tax, VAT, withholding tax, turnover tax, capital gains tax and stamp duty. Every Kenyan tax figure in Achekam's rule book was seeded "under review", and Achekam computes nothing from a figure until an Achekam platform administrator approves it. Firms cannot approve these rules, and no firm user can change a rate.
So, as shipped, Achekam computes no Kenyan tax figure. Before relying on any output, check in the Revenue Service Centre whether the turnover tax rule is approved in your workspace.
Dates matter too. Kenyan rules whose start date the research did not find begin on 1 January 2026 in Achekam, so earlier periods are refused. Turnover tax is one of the exceptions with a researched date: it runs from 1 July 2023.
Prepare, review, approve, then the client
A Kenyan return in Achekam is prepared by one person, reviewed by a second and approved by a third, after which its rule snapshot and figures are frozen. An amendment is a new version; nothing is overwritten.
After approval, a reviewer can send the return to the client for e-signature with a summary PDF, and the signature is recorded as the client's approval. The summary never includes the working papers. For a small client who wants to see one page and sign, that is usually enough. Filing on iTax then remains a person's job.
| Step | Who |
|---|---|
| Collect sales records from the client | The firm |
| Enter sales lines in the Revenue Service Centre | Preparer |
| Review | A second person |
| Approve | A third person |
| Client approval by e-signature | The client |
| File on iTax and pay with the PRN | A person at the firm or the client |
A checklist for each small client
- Confirm the client's annual turnover sits within the band, using KRA's guide for the other conditions.
- Check whether taxable supplies have reached the VAT registration point.
- Confirm the client issues invoices through eTIMS.
- Gather all sales streams: bank, M-Pesa, cash and credit.
- Confirm the turnover tax rule is approved before relying on a computed figure.
- Prepare, review and approve with three different people.
For the next filing round
List the small Kenyan clients you expect to be in turnover tax and confirm each one's band, VAT position and eTIMS use before the next return is due. If an assessment follows, the dates that matter are in objecting to a tax assessment in Nigeria or Kenya.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
