Conservatory Orders Against Implementation the Minimum Tax

Justice Odunga issues conservatory orders restraining Kenya Revenue Authority from the implementation, administration, application, or enforcement of Section 12D of the Income Tax Act. This comes just a day before the tax deadline.

The Kitengela Bar Owners Association petitioned before the court that the enforcement of the Minimum Tax provisions would be unconstitutional and unlawful, which if allowed, would without a doubt hurt the petitioners business as well as the small and medium enterprises that are struggling to get back at their feet after the devastating economy status. The respondents, in this case, include the Parliament, Kenya Revenue Authority, and the Attorney General.

The National Assembly is being sued for failing to uphold, defend and protect the constitution and infringing the people’s rights and freedoms by enacting Section 12D of the Income Tax Act whereas the Attorney General at the capacity of the Principal Government Legal advisor.

KRA on the other hand is being sued for being responsible for the assessment, collection, administration, and accounting of the revenues.  Indeed, it goes without a doubt that the minimum tax guidelines issued by KRA have had underlying uncertainty and confusion to locals in the aspect that minimum tax shall not apply to income which is subject to withholding tax, including digital service tax, provided the income tax payable does exceed the minimum tax payable. The applicability of the same has been brought to questioning and the minimum public awareness on the matter.

On 30th June 2020, the President of the Republic of Kenya had assented to the Finance Act, 2020 which amended to the Income Tax Act by introducing a new Section 12D which introduced the provisions of Minimum Tax at the rate of 1% of the gross turnover effective 1 January 2021. In January, 2021, KRA did issue further guidelines on Minimum Tax.

The granting of these conservatory orders denies KRA the liberty to collect any tax arrears due from the Petitioners and all other taxpayers together with interest and/or penalties. This is until the petition is determined by the court.