Tax and KRA

Tax is the obligation Kenyan business owners fear most and understand least, usually because it was never actually explained, just enforced. Most of what feels confusing is a handful of rules, applied in the wrong order or at the wrong size of business. Get the basics right and tax becomes a predictable monthly task, not a recurring crisis.

Start with the question that decides everything: how big is your turnover

Kenya’s tax obligations for a business are mostly a function of one number: annual turnover. Below KES 1,000,000, you are on standard income tax with no special regime. Between KES 1,000,000 and KES 25,000,000, you are eligible for Turnover Tax, a simplified 1.5% flat tax on gross sales with no expense deductions, but also far less paperwork. Above KES 5,000,000, VAT registration becomes mandatory regardless of which income tax regime you are on. Our Turnover Tax vs VAT tool works this out for your exact number in seconds, because most owners have never been told where they actually sit.

The amnesty window closes 31 December 2026

If you have unfiled returns or unpaid tax debt from 2025 or earlier, this is the cheapest that debt will ever be. KRA is waiving 100% of penalties and interest on tax debts accrued on or before 31 December 2025, provided outstanding returns are filed and the principal tax is paid in full by the deadline. The principal itself is not discounted, but for most businesses the accumulated penalties and interest on an old debt are the larger number, sometimes far larger than the tax originally owed. Full detail, the steps to take, and common mistakes to avoid are in our KRA Tax Amnesty 2026 guide.

The obligations that actually apply to a small business

Depending on how you are structured and what you earn, a working business in Kenya typically deals with some combination of:

• PAYE, if you employ anyone, deducted from salaries and remitted monthly.
• VAT, if registered, at the standard 16% rate, filed monthly.
• Turnover Tax or standard Income Tax, depending on your turnover band.
• NSSF, SHIF, and the Affordable Housing Levy, statutory payroll deductions that sit alongside PAYE, not instead of it.

Work out what you owe an employee’s payslip with the PAYE calculator, and what a price should look like with or without VAT using the VAT calculator.

Deadlines are not evenly spread, and that is where penalties happen

Most payroll obligations (PAYE, NSSF, SHIF, the Housing Levy) are due on the 9th of the month following the payroll period. VAT and Turnover Tax returns are due on the 20th. Annual income tax returns for individuals are due by 30 June. Missing any of these accrues penalties automatically, iTax does not send a warning before the deadline passes, it enforces after it. Our compliance calendar works out your exact next deadline for whichever obligations apply to you, counted down from today.

The most common way businesses get into trouble

It is rarely a deliberate decision to avoid tax. It is drift: a return filed late once, a small penalty ignored because it seemed minor, then the same thing the following month, and eighteen months later the number is large enough that opening the iTax account feels frightening. The single best habit against this is small and boring: check your iTax ledger monthly, even when you are confident there is nothing to see. Confidence is exactly the condition under which small debts become large ones unnoticed.