Court Suspends The Collection Of Minimum Tax

Businesses can now breath a sigh of relief after the High Court sitting in Machakos issued conservatory orders restraining the Kenya Revenue Authority (KRA) from collecting the Minimum Tax pending the hearing and determination of the petition filed by Kitengela Bar Owners Association.

The Minimum Tax which is calculated at the rate of 1% of gross turnover was introduced by the National Treasury through the Finance Act which was assented to by the President on 30th June 2020.

Treasury earlier stated that by introducing Section 12D under the Income Tax Act, firms operating in Kenya would be required to pay a Minimum Tax whether they were making profits or not as they are enjoying the use of services and infrastructure funded by other taxpayers.

He went on, “As such, this novel tax cannot be deemed in any manner of form to amount to income tax. It was therefore contended that the action of the 1st Respondent to introduce the said novel tax is not only ultra vires but also contra the Constitution of Kenya 2010.”

The private sector has decried the implementation of the tax at a time COVID-19 has dented cashflow small businesses while threatening the collapse of many others.

Minimum Tax came into force on 1st January 2021.