CPA Wachira Joseph@WashiraX
If you heed this, you shall live a long life. To play with your grandchildren.
• Doing business with counties was not created for beginners.
So, before you accept that offer letter, understand the tax rules.
Kenyan tax runs on accrual accounting.
This means,
- Your income becomes taxable when the product is delivered to the county or
- When service is delivered to the county.
- Not when the county pays you.
In practice, NORMAL counties take 2 to 3 years to pay.
Example,
You supply computers in April 2026.
- You invoice 20M + 3.2M VAT (16% of 20M).
Total of 23.2m.
Immediately you release that invoice. KRA shows up. They want their cut.
Even though you have not been paid.
- In May, next month, KRA wants their VAT of 3.2M.
- Then, early next year, KRA also wants their corporate income tax.
- Say out of the 20M, your profit is 10M. KRA wants 3M (30% of 10M).
But you have not been paid. Where do you get the money to pay tax from?
That is your problem. It is none of KRA's business.
Infact, if you do not pay, KRA will deploy penalties automatically.
They will then threaten you and eventually freeze your bank accounts.
So before you accept that county tender, make sure you have enough CASH. Not loan. Cash. Mbeca baribari.
Cash to:
- Pay taxes
- Pay your workers
- Pay your suppliers and
- To furahisha watu ya governor so they pay you.
Are we together?