High Court has declared the minimum tax guidelines void and the minimum tax provisions unconstitutional.
In a ruling in Machakos Monday, High Court Judge George Odunga issued an order barring the Kenya Revenue Authority (KRA) from enforcing the minimum tax provisions.
It is a blow to the taxman who has been widening the tax bracket to achieve revenue targets.
President Uhuru Kenyatta assented to the Finance Act, 2020 which amended the income tax act in June 2020.
The Act introduced 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.
Four months later, the High Court stopped the implementation of a 1 percent minimum tax which was to fall due on April 20, 2021.
Judge Odunga issued conservatory orders blocking the Kenya Revenue Authority (KRA) from effecting the tax pending the hearing and determination of the petition.
I grant conservatory orders restraining the 2nd Respondent Kenya Revenue Authority (KRA) whether acting jointly or severally by itself, its servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement of Section 12D of the Income Tax Act, Chapter 470 of the Laws of Kenya as amended by the Tax Laws (Amendment) (No.2) Act, 2020 by collecting and/or demanding payment of the Minimum Tax pending the hearing and determination of this Petition.said justice Odunga.
Further, the order followed a petition challenging the implementation of the new tax by the Kitengela Bar Owners Association.
Additionally, the officials of the association sued the National Assembly alongside KRA’s Commissioner-General and the Attorney General arguing the minimum tax contravenes the constitution.
Nonetheless, the officials warned tax obligations under the minimum tax could rise beyond the statutory 30 percent corporate tax leaving a heavier taxation burden.
The tax was to be paid in four installments and on the 20th day of each period ending on the fourth, sixth, ninth, and twelfth month of the year of income.
Technically, this means businesses would account for the tax on April 20, July 20, October 20, and January 20.