The Kenya Revenue Authority has been stopped from collecting the minimum tax. In an order that issued by the High Court, KRA has been barred from further implementing, administering and enforcing Section 12D of the Income Tax Act by collecting or demanding payment of the minimum tax. The order will remain in force pending a petition filed by registered officials of the Isinya East Sub Ciunty Bar Owners Association.
The order was issued by Justice George Odunga. Justice Odunga said that the enforcement of the impugned legislation stands to kill businesses and livelihood of millions of Kenyans operating small to medium enterprises which form the majority of the business community.
“The death of a business is certainly not a damage that can be remedied by way of damages. That is why it’s in the interest of Justice that this court intervene to preserve the business and livelihood s of the petitioners,” Justice Odunga said in his ruling.
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This tax was introduced under the Finance Act 2020 to be charged at the rate of one per cent of the gross turnover of a business starting January 1, 2021. In the past, income tax was levied on businesses based on the profit they make.
The new tax is a base income tax that is payable by all persons regardless of whether or not they make a profit. It is aimed at bringing more enterprises into the tax bracket despite their financial status.
According to the Finance Act 2020, the minimum tax in Kenya would only be payable where it exceeds the installment tax payable to the taxman. The payment was to be made on or before the 20th day of each period ending on the fourth, sixth, ninth and 12th month of the year of income.
