29th-Nov-2025 • Faith Chebet • SME Taxation
Small and medium enterprises (SMEs) in Kenya form the backbone of our economy. However, navigating the complex world of taxation can often prove daunting for many entrepreneurs. This article aims to demystify SME taxation in Kenya, providing a comprehensive guide to successful compliance.
As a small business owner in Kenya, it's crucial to understand that you are required by law to pay taxes. The primary types of taxes applicable to SMEs include Value Added Tax (VAT), Pay As You Earn (PAYE), National Health Insurance Fund (NHIF) contributions, and corporate tax.
VAT is a consumption tax charged on most goods and services at each stage of the production and distribution chain. If your annual turnover exceeds KES 500,000, you are required to register for VAT.
If you have employees earning more than KES 24,000 per month, you are obligated to deduct PAYE from their salaries and remit it to the Kenya Revenue Authority (KRA).
Employers and employees contribute 5% of an employee's monthly basic salary to NHIF. Self-employed individuals are also required to pay this contribution.
All companies registered in Kenya, regardless of size, are liable for corporate tax. The rate is currently 30% of your company's chargeable income.
To simplify the tax compliance process, consider utilizing business management platforms like Lipabiz Technologies Ltd. These platforms automate key financial processes and offer seamless integration with KRA's e-filing system, making tax submission easier than ever.
For instance, with Lipabiz, you can effortlessly manage your VAT returns, PAYE deductions, and NHIF contributions, ensuring accurate record-keeping and timely submissions. By streamlining these processes, you can focus on growing your business while maintaining compliance.
Remember, understanding SME taxation in Kenya is essential for the long-term success of your enterprise. Embrace this knowledge, optimize your tax strategies, and watch your business flourish.