Court stops KRA from collecting the minimum tax

0
Milimani Law Courts

High Court has temporarily prohibited Kenya Revenue Authority from collecting the recently introduced minimum tax at the rate of one percent of the gross turnover.

Justice George Odunga ruled that the petition by Kajiado and Machakos traders raises weighty questions of law and KRA can “hold its horses” for the time being, as the court navigates the arguments made by parties involved in the case.

“In the result, I grant conservatory orders restraining Kenya Revenue Authority whether acting jointly or severally by itself, it’s servants, agents, representatives or otherwise from the implementation, further implementation, administration, application 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 or demanding payment of the minimum Tax pending hearing and determination of this petition”, ruled Odunga. 

In the petition, Stanley Waweru, Samwel Gitonga and Bernard Oranga, who are officials of Kitengela Bar Owners Association sued KRA, National Assembly and the Attorney General over the introduction of Minimum Tax at the rate of 1% of the gross turnover effective 1st January 2021. 

The judge noted that the impugned Amendment introduces Minimum Tax in Kenya for the first time, hence the Respondents (KRA) can hold off on its implementation for the limited period of determination of the petition. 

He said the suspension of the law will not occasion a lacuna in the operations or governance structure which, if left unfilled, even for a short while is likely to cause very grave consequences to the general populace.

Minimum Tax was assented by President Kenyatta in June 2020 after Parliament amended the Finance Act, 2020 by amending Income Tax Act (ITA) and introduced a new Section 12D which provided the Minimum Tax at the rate of 1% of the gross turnover, from January 2021.

KRA later published “Guidelines on Minimum Tax”, which defines Gross Turnover. Minimum Tax is based on gross turnover and not gains or profits, and all persons, even those in a loss-making position will be required to pay the tax.

The bar owners are based in Kitengela, Isinya, Athi River and Mavoko in Kajiado and Machakos counties argue that the said tax is a threat to their business adding that it is unconstitutional and unlawful.