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HomenewsKRA's Minimum Tax Suspended

KRA’s Minimum Tax Suspended

The High Court has granted conservatory orders restraining Kenya Revenue Authority (KRA) from further implementation, administration, application and/or enforcement of Minimum Tax.

This after officials of the Isinya East Sub-County Bar Owners Association moved to court seeking to stop the implementation of the new tax.

The case was heard by Justice George Odunga virtually at the Machakos Law Court on April 19, 2021.

They sued the taxman for violation of the fundamental rights and freedoms of persons engaged in the business and consumers of their goods and services.

President Uhuru Kenyatta on June 30, 2020, assented to the Finance Act, 2020 which amended to the Income Tax Act by introducing a new Section 12d, providing for the introduction of Minimum Tax at the rate of 1 percent of the gross turnover effective January 1, 2021.

The association termed the move to introduce minimum tax as unconstitutional, unlawful, and devastating to small and medium enterprises which have struggled to grow in the country, especially during the Covid-19 pandemic.

“The impugned Minimum Tax introduced by the 1st Respondent (KRA) in the aforesaid amendment is unconstitutional as it does not fall within the category of taxes imposable by the National Government as envisaged under Article 209 (1) of the Constitution,” the association petitioned.

They argued that minimum tax does not amount to Value-added tax, custom duties nor
excise tax, yet the 1st respondent purports to include it in the category of income tax.

The association further stated that Minimum tax cannot be deemed as an Income Tax as envisaged and governed under the ITA and as such, the same has no place in the ITA and
consequently ought to be adjudged null and void.

Justice Odunga ruled that the application by the Bar Owners Association is with merit, thus suspending the implementation of the tax pending determination of the case.

“Having considered the issues placed before me, it is my view and I find that this is an appropriate case for the 2nd Respondent to “hold its horses” for the time being as this court navigates through the labyrinth of the respective contentions made by the parties herein.

“In the result, I grant conservatory orders restraining the 2nd Respondent whether acting jointly or severally by itself, its servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement by collecting and/or demanding payment of the Minimum Tax pending the hearing and determination of this Petition,” Justice Odunga ruled.