Understanding Your Tax Obligations as a Kenyan SME
Tax compliance is not optional for Kenyan businesses, yet many SMEs struggle to keep up with the various filing deadlines and requirements set by the Kenya Revenue Authority. Missed filings result in penalties that compound quickly, and repeated non-compliance can lead to your KRA PIN being flagged, affecting your ability to win tenders or process payments.
This guide provides a comprehensive checklist of every tax obligation a typical Kenyan SME needs to manage. Whether you are a sole proprietor, a limited company, or a partnership, understanding these requirements is the first step toward staying compliant and avoiding unnecessary penalties.
KRA Registration Essentials
Every business operating in Kenya must register with KRA and obtain a PIN certificate. Beyond this basic registration, you may need to register for additional tax obligations depending on your business type and turnover. VAT registration is mandatory once your annual turnover exceeds KES 5 million, while PAYE registration is required as soon as you hire your first employee.
- KRA PIN registration for the business entity
- VAT registration if annual turnover exceeds KES 5 million
- PAYE registration if you have employees
- Turnover Tax (TOT) registration if annual turnover is between KES 1 million and KES 25 million and you opt for simplified tax
- eTIMS registration for electronic tax invoice management
- Withholding Tax agent registration if applicable
Monthly Filing Requirements
Monthly filings are the most frequent obligation and the easiest to fall behind on. Missing even one monthly return triggers an automatic penalty, so building these deadlines into your calendar is essential. Most monthly returns are due by the 20th of the following month.
| Tax Type | Due Date | Who Must File | Penalty for Late Filing |
|---|---|---|---|
| PAYE | 9th of the following month | All employers | 25% of tax due or KES 10,000, whichever is higher |
| VAT | 20th of the following month | VAT-registered businesses | 5% of tax due or KES 20,000, whichever is higher |
| Withholding Tax | 20th of the following month | Appointed withholding agents | 5% of tax due per month |
| Excise Duty | 20th of the following month | Manufacturers and service providers in excisable categories | 5% of tax due or KES 20,000, whichever is higher |
| Rental Income Tax | 20th of the following month | Landlords earning residential rental income | 5% of tax due or KES 20,000, whichever is higher |
Quarterly Filing Requirements
Some tax obligations follow a quarterly cycle. Instalment tax applies to businesses whose tax liability exceeds KES 40,000 per year. The payments are spread across four instalments, falling on the 20th of the fourth, sixth, ninth, and twelfth months of your accounting period.
| Obligation | Due Dates | Applicable To |
|---|---|---|
| Instalment Tax (1st) | 20th of 4th month of accounting period | Companies and individuals with tax above KES 40,000 |
| Instalment Tax (2nd) | 20th of 6th month of accounting period | Companies and individuals with tax above KES 40,000 |
| Instalment Tax (3rd) | 20th of 9th month of accounting period | Companies and individuals with tax above KES 40,000 |
| Instalment Tax (4th) | 20th of 12th month of accounting period | Companies and individuals with tax above KES 40,000 |
Annual Filing Requirements
Annual returns are the most comprehensive filings and typically require the involvement of your accountant or tax adviser. Company income tax returns are due six months after the end of your financial year, while individual income tax returns must be filed by 30th June each year.
| Filing | Deadline | Key Documents Required |
|---|---|---|
| Company Income Tax Return | 6 months after financial year end | Audited financial statements, tax computation, capital allowance schedule |
| Individual Income Tax Return | 30th June annually | Employment income records, business income, allowable deductions |
| Turnover Tax (TOT) Return | 20th of the following month (monthly) | Gross turnover records for the month |
| NSSF Annual Return | Varies by contribution period | Employee contribution records, employer matching records |
Navigating the iTax Portal
All KRA filings are submitted through the iTax online portal. Familiarize yourself with the system well before your filing deadlines. The portal can be slow during peak filing periods, so avoid waiting until the last day to submit. Ensure your KRA PIN is active and your iTax profile details are up to date.
Keep your iTax password secure and change it regularly. If you delegate filing to an accountant, use the tax agent authorization feature rather than sharing your login credentials. This maintains an audit trail and allows you to revoke access if needed.
Always download and save the acknowledgement receipt after submitting any return on iTax. This receipt is your proof of filing and is essential if KRA ever disputes your compliance status.
eTIMS and Electronic Invoicing
The electronic Tax Invoice Management System (eTIMS) is now mandatory for all VAT-registered businesses and is being progressively rolled out to all taxpayers. eTIMS requires you to generate tax-compliant invoices through KRA-approved software or the KRA eTIMS portal. Every invoice must be transmitted to KRA in real time.
Non-compliance with eTIMS means your customers cannot claim input VAT on your invoices, which will make them reluctant to do business with you. Ensure your invoicing software is eTIMS-integrated so that compliance happens automatically with every invoice you issue.
Building a Compliance Calendar
The most effective way to stay on top of your tax obligations is to build a compliance calendar that maps out every deadline for the entire year. Set reminders at least one week before each due date to give yourself time to prepare the necessary documents and resolve any discrepancies in your records.
- Map all monthly, quarterly, and annual filing deadlines at the start of each year
- Set automated reminders one week and three days before each deadline
- Assign responsibility for each filing to a specific team member
- Maintain a shared tracker showing the status of each filing: prepared, submitted, or acknowledged
- Review your compliance status monthly to catch any gaps early
Automate Your Compliance with the Right Software
Manual compliance management becomes unsustainable as your filing obligations grow. Business management software that integrates with KRA systems can automate tax calculations, generate compliant invoices, and remind you of upcoming deadlines. This reduces the risk of human error and frees up your time to focus on growing your business.
Look for software that calculates PAYE, VAT, and withholding tax automatically based on your transactions. The ability to generate filing-ready reports that match iTax formats will save your accountant hours of work and reduce the cost of professional tax preparation.
