This is a direct method used to assess tax liability from eligible individual persons whose annual turnover does not exceed Sh. 5 Million per year. The presumptive method of taxation is expected to be effective in reducing tax avoidance and in widening the tax base.
The Presumptive Income Tax will be calculated based on 15% of the business permit fee or trade permit or business licenses payable to the County Governments, e.g. (if your business permit per year is 10,000/-, then your tax for the year will be 15/100×10000=1500 )
It will be payable at the time of applying for or renewing a business permit or trade license. Unlike the Turn-Over Tax (TOT) which was payable in every four months, the Presumptive Income Tax is a one-year affair, payable at the time of business permit renewal.
The taxpayers shall be required to generate a payment Registration Number(PRN) on iTax under presumptive tax payment, after which you can pay through Mpesa Pay Bill Number 572572 or any other partner Bank.
Excluded in the Presumptive tax regime includes; persons engaged in Management or Professional services, rental business and incorporated companies.
Presumptive tax replaces Turn-Over Tax (TOT) regime which traders in the informal sector easily avoided hence the dismal performance on the tax head in revenue collection. Unlike other tax heads, the traders are not required to file a tax return under the presumptive taxation method.
If well implemented, the Presumptive Income Tax will assist in generating the required tax revenue from a traditionally difficult sector from a compliance perspective. According to the Analysis of the Finance Bill, 2018 report submitted in August by the Parliamentary Budget Office, Its implementation is an effort to reducing the budgetary deficit gap. Official statistics show the tax revenues stood at Sh320.311 billion against the Sh380.76 billion target as of September 2017.
Follow the Link to Download Financial Bill 2018