High Court of Kenya Stays Collection of Minimum Tax – Withholding Tax


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Implementation of the minimum tax has been put on hold, pending the hearing and determination of various petitions filed in the High Court.

RLA Kenya | Anjarwalla & Khanna representing the Manufacturers Association of Kenya (KAM), the Retail Association of Kenya (RETRAK) and the Kenya Flower Council (KFC) have applied for Preservation Orders and a Constitutional Petition to the High Nairobi Court (the Nairobi petition) on March 15, 2021.

A petition and application for restraining orders have also been filed by officials of the Kitengela Bar Owners Association with the Machakos High Court challenging the new tax (the Machakos Petition). The Machakos High Court rendered a decision on April 19, 2021 and issued Preservation Orders as follows:

“That preservation orders be granted to restrain the KRA, whether acting jointly or severally by itself, its servants, agents, representatives or otherwise, from the implementation, further implementation, administration , the application and/or enforcement of Section 12D of the Income Tax Act, Cap 470 of the Laws of Kenya as amended by the Revenue (Amendment) Act (No. 2) of 2020 by collecting and/or demanding payment of minimum tax pending the hearing and disposition of the petition.” (the orders).

The effect of the orders is that the collection of minimum tax by the KRA, including the installment due on April 20, 2021, has been temporarily halted pending the hearing and decision on the petition. Additionally, the orders are applicable to the Nairobi petition. Machakos’ motion has been set for hearing on May 19, 2021.

Hon. Justice Mrima sitting in Nairobi ordered that the petition from Nairobi be transferred to Machakos. The Nairobi petition will be mentioned before the Honorable Justice Odunga in Machakos on April 27, 2021.

Hon. Justice Mrima sitting in Nairobi ordered that the petition from Nairobi be transferred to Machakos. The Nairobi petition will be mentioned before the Honorable Justice Odunga in Machakos on April 27, 2021.

The minimum tax was introduced by the Finance Act 2020 which was enacted on 30 June 2020 and amended by the Revenue Acts (Amendment) Act 2020 (No. 2) (the Act) which was enacted on December 23, 2020 (TLA) to correct a clerical error stating that minimum tax would apply when the installment is greater than the minimum tax. To address this, the TLA has amended Section 12D of the Income Tax Act, Cap 470 of the Laws of Kenya (ITA) to provide that minimum tax is payable where the installment is less than minimum tax, at the rate of 1% on gross turnover.

The effect of this amendment was to introduce a new tax which would be chargeable unless expressly exempted. The following are exempt from minimum tax:

income exempt under the ITA;

  • employment income

  • Income subject to tax on residential rental income

  • Income subject to turnover tax;

  • Income subject to capital gains tax;

  • Revenue from extractive industries;

  • Income of a person engaged in a business whose retail price is controlled by the government; and

  • Income of a person engaged in insurance business.

In addition, the Cabinet Secretary for the National Treasury and Planning is empowered under section 13(2) of the ITA to exempt from tax income or certain classes of income, through of a notice published in the Official Gazette of Kenya. In this regard, Kenya Airways recently obtained an exemption from the minimum tax provisions of Section 12D of the ITA, through Legal Notice No. 24 of 2021.

Minimum tax is paid in installments on the 20th day of each period ending on the 4th, 6th, 9th and 12th month of the income year.

In January 2021, the Kenya Revenue Authority (the KRA) issued Minimum Tax Guidelines (the Guidelines), which were revised in March 2021. The Guidelines define “gross revenue” to mean gross revenue , gross income, revenue, receipts, yield, proceeds, sales or other income taxable under Section 3(2) of the ITA. The Guidelines also provide that a minimum tax applies where it is greater than the installment due for the period, and the minimum tax is reduced by any withholding tax, withholding tax or digital services tax. paid for the period.

The introduction of the minimum tax, coupled with the effects of the Covid-19 pandemic, has a negative effect on companies, considering that the tax is due on gross turnover and not on profits as it is the norm.


The granting of the orders, although temporary, is a relief for many businesses that were due to make their first minimum tax payment on April 20, 2021.

The suspension of payment of minimum tax will continue to be in effect until the applications are heard and decided or until the decision of the High Court is set aside or stayed by the Court of Appeal. This therefore means that taxation of income in Kenya will continue as before the enactment of the TLA, with no minimum tax levied on gross turnover, until a final ruling on the petitions be made by the High Court.

Originally published on April 21, 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


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