9th-Dec-2025 • Brendah Akinyi • SME Tax Compliance
In the bustling Kenyan business landscape, Small and Medium Enterprises (SMEs) play a pivotal role. However, navigating the complexities of SME tax compliance can sometimes be overwhelming. This post aims to demystify the process, making it easier for you to maintain your fiscal health while focusing on growing your business.
Firstly, let's address why tax compliance is crucial for SMEs in Kenya. By meeting your tax obligations, you not only ensure legal compliance but also gain credibility among clients, suppliers, and potential investors.
The Kenyan Revenue Authority (KRA) offers several platforms to facilitate easy tax compliance. The iTax portal, for instance, provides services such as registration, filing returns, payment of taxes, and viewing tax records online. You can access it at https://itax.kra.go.ke/.
For businesses with a turnover less than KES 500,000 per annum, the KRA offers a simplified tax regime known as the Turnover Tax (TOT). TOT is calculated at a flat rate of 1.5% on monthly taxable turnover, making it an efficient option for micro-enterprises.
However, if your business falls under the VAT category, you'll need to understand the intricacies of the Value Added Tax (VAT) system. You are liable for VAT registration if your annual turnover exceeds KES 1.5 million. VAT is a cascading tax, meaning it's charged on the value added at each stage of production or distribution until the final consumer purchases the product.
Consider a coffee shop with a monthly turnover of KES 700,000. Since this exceeds the VAT registration threshold of KES 1.5 million, the business must register for VAT and charge VAT on their sales. Let's assume the VAT rate is 16%. In this case, the coffee shop would charge an additional 16% (KES 112,000) on their sales.
To ease this process, consider leveraging digital solutions like Lipabiz Technologies Ltd's business management platform. It offers integrated tax compliance features that simplify VAT calculations and filing, allowing you to focus on your core operations.