The government has announced new taxes for small businesses with an annual turnover of below Ksh5 million.
According to the new law,traders in this bracket will now be required to remit a new presumptive tax computed at the rate of 15 percent of their annual permit fee.
The presumptive tax regime by Kenya Revenue Authority (KRA) is aimed at reducing the compliance burden for small businesses hence bringing on board more taxpayers.
This new tax will target an estimated 2.7 million informal traders who operate small businesses.
Although KRA is yet to draw up the modalities on its implementation, the small traders are expected to collectively pay at least Ksh5 billion in 2019.
For businesses with an annual Ksh20,000 business permit, the traders are expected to pay Ksh3,000.
However, there are disagreements between KRA and county governments on how the tax should be collected.
KRA argues that counties should directly levy the taxes while renewing the permits on behalf of the national government.
Counties have on the other hand opined that they are not benefiting from the tax and don’t see the reason they should collect it on behalf of KRA.
The revenue collected by counties from business permits is one of the highest with an annual target of Ksh55 billion for 2018.
KRA is likely to fast track the implementation process given that the projected revenues to be collected have been budgeted for.