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Turnover Tax
1. What is Turnover Tax?
This is a tax that is charged on gross sales/turnover (i.e. earnings, income, revenue, takings, yield and proceeds)..

2. Who is liable to pay Turnover Tax?
- Any person carrying on any business with an annual turnover of K800,000 or less.
- Any person whose business earnings are subject to withholding tax and it is not the final tax such as, rental income, commissions, interest earned by companies, royalties earned by residents, etc.

3. Who is not liable to pay Turnover Tax?
- Any person carrying on a business with an annual turnover of more than K800,000.00
- Any individual or partnership carrying on business of public service vehicle for the carriage of persons.
- Partnerships carrying on any business irrespective of whether the annual turnover is K800,000 or less.
 
Partners' income from the partnership is also excluded from Turnover Tax. This is because it is the partnership that carries on business and not the partners. Partners are distinct from the firm (partnership) as stipulated by Section 4 of the Partnership Act of 1890.
 
- Consultancy fees are not part of Turnover Tax as per Amendment to the Income Tax Act # 1 of 2005.
- Any person whose turnover is K800, 000.00 or below and is voluntarily registered under Value Added Tax (VAT).
- Any person who is involved in mining operations as provided under the Mines and Minerals Development Act.
- Any person whose business earnings are subject to withholding tax and it is the final tax, such as:-

  • Bank interest for individuals
  • Dividends
  • Interest on Government Bonds
  • Interest earned on Treasury Bills for Charitable Institutions and other exempt persons.
  • Management and Consultancy fees paid to non - residents.
  • Payments made to non - resident contractors.
  • Public Entertainment Fees paid to non - residents.
  • Royalties paid to non - residents, etc.

4. At what rate is Turnover Tax calculated?
It is calculated at the rate of 3%.

5. How is Turnover Tax calculated?
Turnover Tax is calculated on gross sales/turnover.

6. Are there any returns to be submitted for Turnover Tax?
Yes. Turnover Tax Remittance Cards are to be submitted by the 14th of the month following the month in which the transactions occurred.

7. When should payment for Turnover Tax be?
Remittance for Turnover Tax is due by the 14th of the month following the month in which the sales are made.

8. For how long are taxpayers expected to keep business records?
Taxpayers will be required to keep all business records pertaining to turnover for a period of up to 6 years. They are also encouraged to keep other business records for purposes of determining their tax liabilities in case they exceed the turnover threshold of K800,000.00.

9. Does a taxpayer who is under Turnover Tax have to submit provisional tax returns?
No. Provisional tax returns are only required for taxpayers whose gross sales/turnover is above K800,000.00

REGISTRATION AND OTHER PROCEDURES

Registration
Taxpayers will be required to notify the Commissioner General within 30 days of commencement of business. They will be registered and given a Taxpayer Identification Number (TPIN), Individual or Company Income Tax account number and a Pay As You Earn (PAYE) number where applicable.

New Taxpayer
A new taxpayer will be required to register as stated above and they will use their estimated turnover on the registration. It will be necessary to register for all eligible tax types at initial registration. Note that all tax matters starting from registration can be done online.

Cessation of business
If a taxpayer closes down his business for whatever reasons, such as business failure, bankruptcy, winding up, etc., they are advised to send a notification to the Commissioner General immediately after such cessation.

Change in Annual Turnover
Where a taxpayer whose turnover is below the threshold discovers that his annual turnover will exceed K800, 000.00 during the course of the year, he will notify the Commissioner General immediately. However, he shall continue to pay Turnover Tax till the end of that particular charge year and shall be assessed under the Income Tax System.

When a taxpayer who has been paying Provisional Income Tax discovers that his annual turnover will not exceed K800, 000.00 during the year, he shall notify the Commissioner General immediately. However, he shall continue to pay Provisional Income Tax till the end of that particular charge year and shall be assessed under the Income Tax System. At the end of the year, the taxpayer will be required to submit a Turnover Tax Return and a set of accounts with supporting documents covering the whole year.

Any change from Turnover Tax to Income Tax and vice versa shall take effect only at the beginning of a charge year. No change will be effected during the course of the charge year.
The changeover can either be initiated by the Taxpayer or indeed by ZRA where the system detects the change in turnover.
 


 
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