Running a small business in Kenya comes with many financial responsibilities, including taxes. However, understanding tax-saving strategies can help reduce your tax burden and keep more money in your business. Here are five practical tax-saving tips for small businesses in Kenya.
1. Keep Proper Financial Records
One of the easiest ways to save on taxes is by maintaining accurate financial records. Proper bookkeeping ensures:
✅ You track all expenses and claim allowable deductions.
✅ You avoid penalties from incorrect tax filings.
✅ You have a clear picture of your business’s financial health.
💡 Tip: Use accounting software like QuickBooks or Xero to simplify record-keeping.
2. Take Advantage of Tax Deductions
The Kenya Revenue Authority (KRA) allows businesses to deduct certain expenses from taxable income. Common deductible expenses include:
🔹 Office rent and utilities
🔹 Employee salaries and benefits
🔹 Business-related travel expenses
🔹 Marketing and advertising costs
💡 Tip: Always keep receipts and invoices to support your deductions in case of an audit.
3. Register for VAT (If Eligible)
If your business has an annual turnover of KES 5 million or more, you must register for Value Added Tax (VAT). While VAT means charging extra on your goods or services, it also allows you to claim Input VAT on business expenses.
💡 Tip: Claim input VAT on purchases related to your business to reduce your overall tax liability.
4. Leverage Tax Incentives & Reliefs
Kenya’s tax system provides various incentives to encourage business growth. These include:
✅ Investment Deductions: If you invest in manufacturing or infrastructure, you can deduct a percentage of costs.
✅ Wear & Tear Allowances: Businesses can claim depreciation on machinery, vehicles, and equipment.
✅ Presumptive Tax Exemption: Small businesses earning below KES 5 million annually can opt for Turnover Tax (TOT) at 1% instead of VAT and Corporate Tax.
💡 Tip: Work with a tax consultant to ensure you’re maximizing all available tax incentives.
5. File Taxes on Time to Avoid Penalties
Late tax filing leads to penalties and interest charges from KRA, which can strain your business finances. Common tax deadlines include:
📅 PAYE (Employee Taxes): Due on the 9th of every month
📅 VAT Returns: Due on the 20th of every month
📅 Corporate Income Tax: Due by 30th June each year
💡 Tip: Set calendar reminders or use KRA’s iTax portal to file and pay taxes promptly.
Final Thoughts
Tax planning is crucial for small business success. By keeping accurate records, leveraging deductions, registering for VAT, using tax incentives, and filing on time, you can significantly reduce your tax burden.
📢 Need expert tax advice? iScore Consultancy can help! Contact us today for personalized tax solutions.