27th-Feb-2026 • Faith Chebet • SME Tax Compliance
Welcome, small business owners! Navigating tax compliance can seem like a daunting task, but fear not. In this article, we'll break down the essentials of SME tax compliance in Kenya and provide practical tips to help you stay compliant. By understanding your tax obligations and utilizing tools such as Lipabiz, you can ensure your business stays on the right side of the law while focusing on growth.
Compliance with tax laws is crucial for any business. Not only does it demonstrate credibility to clients, but it also keeps your operations running smoothly and reduces the risk of penalties or legal issues. According to the Kenya Revenue Authority (KRA), non-compliance costs businesses approximately 2% of their revenue each year.
The main taxes that apply to most small and medium enterprises in Kenya include Value Added Tax (VAT), Pay As You Earn (PAYE), National Health Insurance Fund (NHIF) contributions, and corporate tax. It's essential to understand these obligations and ensure you meet the necessary deadlines.
If your annual turnover exceeds KES 5 million, you must register for VAT. This tax is charged on most goods and services at a rate of 16%. By using Lipabiz's integrated invoicing feature, you can easily generate VAT-compliant invoices.
If you employ staff, you must deduct PAYE from their salaries and remit it to the KRA. The rate varies based on the employee's taxable income.
Employers are required to contribute 5% of an employee's gross salary to NHIF, while employees pay 7.5%. Lipabiz can help automate these contributions to ensure timely payments.
All companies in Kenya are subject to corporate tax at a rate of 30% on their taxable income. This tax is payable annually, and Lipabiz can help you manage your financial records to prepare for this payment.
Lipabiz offers a comprehensive business management platform that simplifies tax compliance. With features like automated invoicing, payroll management, and financial record-keeping, you can easily stay on top of your tax obligations while focusing on growing your business.
