This is for you...........
1.
Who is a Small Business Taxpayer?
The
Income Tax Act defines a Small Business Taxpayer for Income
tax purposes as a resident taxpayer whose gross turnover
from all businesses owned by such a person in a year is
more than 5 million shillings but less than FIFTY MILLION
SHILLINGS.
The term TURNOVER refers to one's total sales in a year.
2.
Persons not included:
Not
included in this category of taxpayers even when the TURNOVER
is less than fifty million shillings are persons carrying
on the following businesses:
(a)
Medical practice
(b) Dental practice
(c) Architectural service
(d) Engineering service
(e) Accounting and Audit practices
(f) Legal practice
(g) Any other professional service
(h) Public entertainment services
(i) Public utility service
(j) Construction service
NOTE:
Persons falling under the above listed business categories
OR whose gross turnover is FIFTY MILLION shillings and above
in a year are required by law to file final and provisional
income tax returns and be assessed to income tax the normal
way which is based on Net Income for the year.
3. Computation of the tax liability
The
tax payable is calculated and determined on the basis of
one percent of the gross turnover. In the case of a taxpayer
whose gross turnover does not exceed Twenty Million Shillings
a year, the tax payable is fixed at shs. 100,000 a year.
| GROSS
TURNOVER |
TAX
PAYABLE |
(a)
Gross turnover above 5 million but
not exceeding shs. 20 million a year |
100,000/= |
| (b)
Gross turnover falling between shs. 20 million and 30
million a year. |
1%
of gross turnover up to a maximum of shs. 250,000 |
| (c)
Gross turnover falling between shs. 30 million andshs.
40 million |
1%
of gross turnover up to a
maximum of shs. 350,000 |
| (d)
Gross turnover falling between Shs. 40 million and Shs.
50 million |
1%
of gross turnover up to a maximum of Shs. 450,000 |
ILLUSTRATIONS
A
Bracket (20M - 30M)
(i)
Actual turnover
1% of turnover |
22
Million Shs. 220,000 (less than 250,000) |
| Therefore
tax payable is shs. 220,000. |
(ii)
Actual turnover
1% of turnover |
28
Million
shs. 280,000 (more than 250,000) |
| Therefore
tax payable is Shs. 250,000 |
B.
Bracket (30M - 40M)
(i)
Actual turnover:
1% of turnover: |
34
Million
Shs. 340,000 (less than
Shs. 350,000) |
| Therefore
tax payable is Shs. 340,000 |
(ii)
Actual turnover
1% of turnover |
39
Million
Shs. 390,000 (more than Shs. 350) |
| Therefore
tax payable is shs. 340,000 |
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C.
Bracket (40M - 50M)
(i)
Actual turnover
1% of turnover |
Shs.
43,580,000
Shs. 435,800 (less than shs. 450,000) |
| Therefore
tax payable is Shs. 435,800 |
(ii)
Actual turnover
1% of turnover |
Shs.
48,700,000
Shs. 487,000 (more than Shs. 450,000) |
| Therefore
tax payable is Shs. 450,000 |
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Return
of Gross Turnover
In order to enjoy the benefit of paying the LOWER in each
bracket, a taxpayer is required to file a return of Gross
turnover for a given year. Otherwise a taxpayer will automatically
be assessed to the standard tax in the bracket in which
such taxpayer falls as follows:
Gross
Turnover Bracket
|
Annual
Tax Payable
Shs Shs |
| 1.
(5 - 20M) |
100,000 |
| 2.
(20 - 30M) |
250,000 |
| 3.
(30 - 40M) |
350,000 |
| 4.
(40 - 50M) |
450,000 |
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5.
(a) Finality of Tax
The tax is computed on the basis of GROSS TURNOVER and is
a final tax. This means no further assessment is required.
Also note that no deductions are allowed in respect of any
expenditure or losses.
(b) Set off of Tax Credit
No tax credit is allowed to be set off against the final
tax except in the following cases:
(i) A tax credit arising out of withholding tax on receipts
included in the gross turnover of the taxpayer.
(ii) Any provisional tax paid against the taxpayer's turnover
during the year.
6. Payment of Tax
The tax may be paid in full at any time during the relevant
year of income. A taxpayer may however opt to pay the tax
provisionally during the year in:
- four
equal quarterly installments in case of individual.
- two
equal half yearly installments in case of any other person
e.g. company.
7.
Election (Option of Income Tax Assessment)
The law provides for an option to the taxpayers by notifying
the Commissioner in writing that he/she prefers (opts) to
be assessed under the NET INCOME method. In order to qualify,
a taxpayer is required to submit the election notice together
with his/her Annual Income Tax Return for that year by the
due date of filing such return. |
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