On Monday, the High Court sitting in Machakos gave conservatory orders concerning the implementation of the controversial Minimum Tax. The Minimum Tax was due today but Kenya Revenue Authorities ambitions were cut short.
Justice George Odunga said, “I grant conservatory orders restraining the 2nd Respondent (Kenya Revenue Authority) 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.”
The case, filed in Machakos by Kitengela Bar Owners Association through their lawyers Okwach & Company Advocates, has raised similar issues to the suit that had been filed last month by the Kenya Association of Manufacturers, Retailers Association of Kenya, and Kenya Flower Council in Nairobi.
The orders granted in Machakos are applicable to the Petition filed in Nairobi and can be relied on by all
Kenyans. By virtue of the Conservatory Orders having been granted, the Minimum Tax payments due Tuesday have stayed until the matter is heard and determined in full.
The rate of Minimum Tax is 1 percent of the gross turnover of the company. What is the effective date for Minimum Tax? When is the due date for filing and paying Minimum Tax? The tax shall be paid in installments and shall be due on the 20th day of each period ending on the 4th, 6th, 9th, and 12th month of the year of income.
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The genius people in Jubilee Government, sat down, discussed and deliberated, and agreed that Minimum Tax was the way to go. That even if your business made losses, you are to take a loan to pay 1% to GoK as tax. May the State live Forever. Haily the Royal Family.
— Juma G 🇰🇪 (@jumaf3) April 19, 2021
Deloitte said the minimum tax act appears to be a drafting error, as the Finance Bill has also proposed to amend Section 12 of the Income Tax Act to exempt persons from payment of installment tax if the minimum tax would be higher than installment tax.
“Minimum tax should only be applicable where installment tax payable is lower than minimum tax and we expect this to be amended before the Bill is enacted,” said the experts.
As many entities are likely to report losses under the current adverse conditions, this measure should be reviewed and aligned to best practice where minimum tax applies where an entity reports consecutive tax losses for at least 3 or 5 years.
Did the High Court suspend Minimum Tax for Good?
People are celebrating as if Minimum Tax has been suspended for good. KRA might just be laughing all the way to the bank as soon as the case is heard and determined. Remember, the law is still in place and the law wasn’t passed by KRA but your MPs. KRA just implements.
— Juma G 🇰🇪 (@jumaf3) April 19, 2021
The High Court did not suspend the Minimum Tax for good, contrary to reports by some sections of the media. The implementation has been put to stop until the case is heard and determined. By the way, KRA does not pass laws. Ask your MPs.