Guidelines on Minimum Tax

Guidelines on Minimum Tax

KPMG Tax Alert


The Finance Act, 2020 introduced Minimum Tax through a new Section 12D to the Income Tax Act (CAP 470) of the Laws of Kenya (ITA) with effect from 1 January 2021. The new section provides that where a where a person’s Instalment Tax payable is lower than the Minimum Tax, Minimum Tax shall be payable. Paragraph 11 of the Third Schedule to the ITA sets the rate of minimum tax at one percent (1%) of gross turnover. 


Following the above change, there were numerous questions on the tax including what income would be subject to tax, how the tax would be computed especially for companies with non-December year-ends, and the treatment of post-year adjustments to income among others.  In response to the queries, the KRA has issued guidelines which seek to provide clarity to some of these issues. 


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