Running a small business in Kenya comes with numerous challenges, and tax compliance is one of the most critical. The Kenya Revenue Authority (KRA) offers a range of services specifically designed to help small businesses comply with tax laws efficiently. Understanding and leveraging these services not only ensures compliance but also positions your business for sustainable growth. This guide breaks down the essential KRA Tax Services for Small Businesses and how to use them effectively.
1. Turnover Tax (TOT)
Turnover Tax (TOT) is one of the most significant services small businesses should know. Designed for enterprises with an annual turnover between Kshs. 1,000,000 and Kshs. 25,000,000, TOT simplifies tax obligations.
Key points about TOT:
- Tax rate: 1.5% on gross sales, effective from July 1, 2023.
- Final tax: No deductions for expenses are allowed.
- Filing and payment: Due monthly by the 20th. Payments can be made through the iTax portal or the KRA M-Service App.
- Penalties: Late payments incur a 5% penalty and 1% interest per month.
TOT is ideal for small businesses as it reduces paperwork and simplifies compliance. By paying TOT, you avoid complexities associated with VAT and corporate income tax. This makes TOT one of the most user-friendly KRA Tax Services for Small Businesses.
2. eTIMS (Electronic Tax Invoice Management System)
The Electronic Tax Invoice Management System (eTIMS) enables small businesses to issue official electronic invoices, a key requirement for modern trade.
Options for small businesses include:
- eTIMS Lite: Accessible via USSD (*222#) or the eCitizen portal. Suitable for traders with annual turnover not exceeding Kshs. 5,000,000.
- Buyer-initiated invoicing: Allows buyers to issue invoices on behalf of small sellers.
Benefits of using eTIMS:
- Eliminates manual invoices and reduces errors.
- Ensures compliance with tax regulations.
- Makes record-keeping easier for audits.
For small traders, eTIMS Lite is an efficient way to comply without investing in complex invoicing systems. This makes eTIMS a cornerstone of KRA Tax Services for Small Businesses.
3. KRA PIN Registration
A KRA Personal Identification Number (PIN) is mandatory for all business operations in Kenya. Without a PIN, a business cannot file taxes, obtain a Tax Compliance Certificate, or engage in formal transactions.
How to register:
- Visit the iTax portal.
- Fill out the PIN application form.
- Submit the required documents (ID, business registration certificate).
- Receive your KRA PIN electronically.
Having a PIN is the first step to accessing most KRA Tax Services for Small Businesses. Ensure that your business PIN is active and linked to your business bank account to facilitate seamless tax transactions.
4. Filing and Paying Taxes
Timely tax filing is crucial. KRA provides multiple channels to file and pay taxes, making compliance straightforward for small businesses.
Steps to file and pay:
- Log in to the iTax portal.
- Select the type of tax you need to file (e.g., TOT, PAYE).
- Complete the online form.
- Generate a payment slip and make payments at any KRA-approved bank or via the M-Service App.
Benefits of using the iTax portal:
- Reduces the need to visit KRA offices physically.
- Minimizes errors in tax filing.
- Enables access to your tax records anytime.
Filing taxes digitally is a core part of KRA Tax Services for Small Businesses, promoting transparency and efficiency.
5. Tax Compliance Certificate (TCC)
A Tax Compliance Certificate (TCC) is proof that your business is tax-compliant.
Why a TCC is important:
- Required for bidding on government or private tenders.
- Necessary for applying for loans or business permits.
- Demonstrates credibility to suppliers and investors.
How to obtain a TCC:
- File all outstanding taxes on the iTax portal.
- Submit a request for a TCC.
- Receive the certificate electronically once approved.
Maintaining a TCC is part of good financial governance and ensures your business can access opportunities that require proof of compliance.
6. Support and Resources
KRA provides extensive support to small businesses through multiple channels:
- Call center: 020 499 9999 or 0711 099 999.
- Email inquiries: callcentre@kra.go.ke.
- Online resources: Tutorials, FAQs, and step-by-step guides on the KRA website.
KRA also conducts regular training and workshops for small business owners, helping you understand tax laws and compliance requirements. Using these resources ensures you stay updated on changes to KRA Tax Services for Small Businesses.
7. Benefits of Engaging KRA Services
Engaging fully with KRA tax services provides tangible benefits:
- Avoid penalties: Timely filing prevents fines and interest.
- Access to finance: Banks and lenders often require tax compliance proof.
- Business credibility: A compliant business is trusted by clients, suppliers, and partners.
- Simplified operations: Automated systems like iTax and eTIMS reduce paperwork and save time.
For small businesses, these benefits translate into cost savings, smoother operations, and opportunities for growth.
8. Tips for Small Businesses
To maximize KRA services:
- Register for a KRA PIN immediately after business setup.
- Use TOT if your turnover is under Kshs. 25 million to simplify taxes.
- Adopt eTIMS Lite for seamless invoicing.
- File and pay taxes online to avoid penalties.
- Regularly download and maintain your TCC for business credibility.
- Seek guidance from KRA’s support center whenever unsure.
Following these steps ensures you are fully leveraging KRA Tax Services for Small Businesses.
Conclusion
Understanding and using KRA tax services is essential for any small business in Kenya. Tools like TOT, eTIMS, and the iTax portal make compliance easier, reduce errors, and save time. By registering for a KRA PIN, filing and paying taxes promptly, and maintaining a TCC, you position your business for growth and credibility.
Small businesses that engage with KRA services strategically gain a competitive advantage and ensure long-term sustainability. Make tax compliance a priority, and your business will thrive.
