Businesses in the country have been afforded a relief after the High Court in Machakos on Monday, September 20, 2021, blocked the Kenya Revenue Authority (KRA) from implementing the Minimum Tax.
Justice George Odunga in his ruling declared section 12D of the Income Tax Act unconstitutional.
“Minimum tax provisions are unconstitutional and the guidelines should be considered void. I, therefore, issue an order restraining KRA from implementing, further implementing or enforcing the provisions of Section 12D of the Income Tax Act,” he ruled.
This is after the Kitengela Bar Owners Association (KBAO) brought a suit against Attorney General Paul Kihara and KRA, seeking to have the tax declare unlawful.
The minimum tax if allowed would have been applicable to all businesses in Kenya whether they are making profits or losses.
Justice Odunga in concurrence with the petitioners, stated that the new tax would be harmful to businesses in the country. He noted that the levy would be unfair to loss-making businesses that would still be required to pay one per cent of their income to KRA as minimum tax.
He criticised the National Assembly for failing to involve the Senate before introducing the levy that had already been implemented by a number of counties, exposing businesses to double taxation.
In 2020, the National Assembly amended the Income Tax Act, allowing KRA to begin collection of the new levy in January 2021.
Had the court dismissed the petitions, businesses would have had to pay the tax to KRA once every quarter.
