KRA Exempts MSMEs from Quarterly Tax Instalments, Allows Direct Payments via M-Pesa to Simplify Tax Compliance and Boost Registration

The Kenya Revenue Authority (KRA) has announced a major change for Micro, Small, and Medium Enterprises (MSMEs). The authority will exempt them from quarterly tax instalments. Businesses can now pay directly using mobile money platforms like M-Pesa. A Payment Reference Number (PRN) will no longer be required.

The move is part of a planned overhaul of the Turnover Tax (ToT). KRA aims to expand the tax base and increase active taxpayers from seven million to 11.5 million by June 2027. Currently, only 30,000 firms registered for ToT in the 2023/2024 financial year. They generated KSh 391 million. Uptake has been low, despite the tax’s simplicity.

“Only 30,000 taxpayers have signed up. Even after cutting the rate from 3% to 1.5%, very few have registered,” said George Obell, KRA Commissioner for Micro and Small Enterprises. He added that one-size-fits-all approaches do not work. “For example, sugarcane suppliers operate seasonally. They cannot meet four quarterly instalments. We must give them simpler ways to pay taxes without hassle.”

Currently, KRA’s iTax portal issues a PRN as confirmation of payment. Under the proposed overhaul, businesses can pay via mobile money without a PRN. The change reduces bureaucracy and makes tax compliance easier for small businesses.

KRA also clarified requirements for obtaining a Tax Compliance Certificate (TCC). Taxpayers must register with eTIMS/TIMS, submit returns, and make timely payments. Employers must correctly apply all tax reliefs and deductions. The iTax portal will verify all TCC applications.

The authority noted that 22.6 million Kenyans are registered to pay taxes. Only seven million are actively paying. Removing inactive or ineligible taxpayers leaves about five million real contributors.

The new measures aim to simplify taxation. They will broaden the tax base and make compliance practical for MSMEs. The changes will strengthen revenue collection while easing the burden on small businesses.