On 20th September 2021, the High Court of Kenya ruled that the amendment to section 12D of the Income Tax Act which introduced minimum tax, is unconstitutional. Minimum tax was introduced under the Finance Act, 2020 to be charged at the rate of one per cent (1%) of the gross turnover of a business beginning from 1st January, 2021. However, individuals and companies remitting employment tax and PAYE, rental income tax, turnover tax for small-sized firms, as well as capital gains tax and proceeds from mining or oil exploration taxes were exempted from payment of this minimum tax. The High Court ruling comes as a relief for companies that were wary of paying the prescribed levy on total sales from the beginning of 2021, even as they had to cope with the economic fallout occasioned by the coronavirus pandemic.  This decision will not only ensure that many businesses are productive but it will also provide an opportunity for loss-making businesses to bounce back and generate the much-needed revenue to support themselves.

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