Court Bars KRA From Enforcing Income Tax Act Says its Unconstitutional

By Debbie Moraa

The High Court judge Justice Odunga has declared the minimum tax provisions unconstitutional and the minimum tax guidelines void. The judge has issued an order restraining KRA from further implementing or enforcing the provisions of Section 12D of the Income Tax Act.

The Finance Act 2020 introduced minimum tax payable at the rate of 1% of gross turnover, which came into effect on 1st January 2021.

Being a Turnover based tax means that the Minimum Tax is not based on the affluence of a business, usually measured by the bottom-line. Therefore, the businesses that would have been affected by the Minimum Tax are, Low margin businesses such as those dealing with Fast Moving Consumer Goods; Capital intensive businesses with tax incentives; New businesses and loss-making companies.

Through a statement issued by Kenya Association of Manufacturers(KAM) Chairman Mucai Kunyiha, they applauded Institute of Certified Public Accountants of Kenya (ICPAK), Kenya Flower Council, Retail Trade Association and Isinya East Sub-County Bar Owners Association, and the legal team Anjarwalla & Khanna Advocates and Okwatch and Company Advocates who worked tirelessly to realize the outcome.

This historic decision by the courts today provides much needed relief to businesses that continue to strain under the weight of over-taxation and unpredictability in the country today. It not only ensures that many businesses remain open and productive but provides space for businesses to bounce back and generate the much-needed revenue to support our country.


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