The Court of Appeal of Kenya (D. Musinga, (P), H. Omondi & K. Laibuta JJA) through a judgment delivered on Friday, 2 December 2022 upheld the High Court decision that declared the Minimum Tax unconstitutional and the Minimum Tax guidelines void.

7 December 22

The decision arises from an appeal filed by the Kenya Revenue Authority (KRA) against the High Court decision of Odunga J. (as he then was) of 20 September 2021.

Minimum Tax was introduced through the Finance Act, 2020 enacted on 30 June 2020 and amended by the Tax Laws (Amendment) (No.2) Act (TLA), 2020 (the Act) enacted on 23 December 2020 to correct a drafting error which stated that minimum tax would apply where installment tax is higher than minimum tax. To resolve this, the TLA amended section 12D of the Income Tax Act (ITA), Chapter 470 of the Laws of Kenya to provide that Minimum Tax is payable where the installment tax is lower than the minimum tax, at the rate of 1 percent on the gross turnover.

The effect of this amendment was to introduce a new tax that would be payable unless a taxpayer was explicitly exempt. The following were the exemptions:

  • Income that is exempt under the ITA;
  • Employment income
  • Income subject to residential rental income tax
  • Income subject to turnover tax;
  • Income subject to capital gains tax;
  • Income of the extractive industries;
  • Income of a person engaged in a business whose retail price is controlled by the Government; and
  • Income of a person engaged in the insurance business.

What Does this Decision by the Court of Appeal Mean?
The unanimous decision by the Court of Appeal is a relief to Kenyan taxpayers who are overwhelmed with tax demands in a period where the KRA has become more aggressive in tax collections. There will be no payment of this new tax called Minimum Tax on the 20th day of each period ending on the 4th, 6th, 9th and 12th month of the year of income of a person/entity. The order prohibiting the KRA from implementing, further implementing, administering, applying and enforcing Section 12D of the ITA, as amended by the TLA by collecting and demanding payment of the Minimum Tax, remains in place. Simply put, minimum tax is not payable in Kenya.

Should you have any questions regarding the information in this legal alert, please do not hesitate to contact, Daniel Ngumy and Faith Macharia.



1. Edel Ouma, Principal Associate
2. Odhiambo Obonyo, Prinicpal Associate