Kenya: Guidelines clarifying application of the minimum tax

Kenya: Application of the minimum tax

The Kenya Revenue Authority issued guidelines that aim to clarify issues related to the new minimum tax.


The Finance Act, 2020 introduced the minimum tax, effective 1 January 2021. The minimum tax (imposed a rate of 1% of gross turnover) is payable when the amount of a taxpayer’s instalment tax payable is less than the amount of the minimum tax. 


Following enactment of the minimum tax, there were questions concerning, among other issues, what income would be subject to the minimum tax; how the tax would be computed for companies with a non-calendar year-end; and the treatment of post-year adjustments to income.

To provide clarity about these unresolved issues and other items under the minimum tax, the Kenya Revenue Authority issued guidelines defining the following terms or providing guidance about:

  • Gross turnover
  • Persons (that is, taxpayers subject to the minimum tax)
  • Transition rules for persons whose accounting period does not follow the calendar year
  • Payment of minimum tax for ordinary entities
  • Payment of minimum tax for agricultural, pastoral or horticultural activities
  • Tax credit for overpayment
  • Underpayment of tax
  • Entity in a loss position
  • Minimum tax applicable to individuals exempt from instalment tax
  • Filing of end-of-year income tax returns
  • Application of losses

The guidelines clarify that income from insurance businesses and from businesses with a retail price controlled by the government is exempt from the minimum tax. This clarification reflects that the legislation had a drafting error that effectively subjected these businesses to minimum tax.

The guidelines further address the introduction of a minimum tax balance and the requirement to file a minimum tax declaration by the 20th day of the month following the end of the accounting period.

The guidelines confirm that when the sum of the minimum tax and instalment tax exceeds the minimum tax payable, the excess may be carried forward.

Read a February 2021 report [PDF 218 KB] prepared by the KPMG member firm in Kenya

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