The High Court in Kenya has suspended the implementation of a newly introduced minimum tax on businesses following a petition challenging its enforcement.
Justice George Odunga granted the conservatory orders on Monday restraining the Kenya Revenue Authority (KRA) from collecting the tax at the rate of one per cent of the gross turnover.
As a result, the minimum tax payments which are due Tuesday, April 20, remain suspended until the matter is heard and determined.
The tax, introduced through the Finance Act, 2020, is payable by all companies regardless of whether they make a profit or not.
Parliament amended the Income Tax Act (ITA) to introduce the minimum tax from January 2021.
The tax, set at a rate of one per cent of the gross turnover, is paid in instalments due on the 20th day of every quarter of a financial year.
“I grant conservatory orders restraining the Kenya Revenue Authority (KRA) …from collecting and/or demanding payment of the minimum tax pending the hearing and determination of this petition,” said Justice Odunga in his ruling signed and delivered virtually in a court in Machakos County.
The case was filed by the Kitengela Bar Owners Association against the National Assembly, KRA and the Attorney General.
In the petition, the bar owners argue that income tax is only chargeable on gains or profit and not as gross turnover as implied by the minimum tax.
Further, they say the tax is in violation of the Constitution and could harm businesses.
The bar owners also fault the National Assembly for purporting to include the tax in the income tax category when they passed the amendment to the law.
Similar issues were raised in another suit filed in March by the Kenya Association of Manufacturers (KAM), Retailers Association of Kenya (RAK) and Kenya Flower Council (KFC) in Nairobi.
The High Court sitting in Nairobi has since transferred the Nairobi petition to Machakos to have the two petitions consolidated and heard together.