26 April 2021



The Finance Act, 2020 introduced Minimum Tax at the rate of 1% of Gross Turnover. Effectively, the tax is to apply as an alternative to installment taxes for companies with losses or very low profits.


Section 12D of the Income Tax Act and the Commissioner’s Guidelines on Minimum Tax (revised in March 2021) outlined on how the tax is to be applied. It is imposed on only where the value of instalment tax is lower than the Minimum Tax applicable.


The following incomes are exempted from the application of minimum tax:


  • Income tax exempt persons
  • Employment income
  • Residential rental income
  • Persons taxed under the Turnover Tax Regime
  • Capital Gains
  • Extractive Industries taxed under the Ninth Schedule to the ITA
  • Insurance companies
  • Businesses whose retail price is controlled by the Government such as petroleum companies
  • Income that is subject to withholding tax, including Digital Service Tax provided that at the end of the accounting period, the tax payable on taxable income exceeds minimum tax payable.


The Minimum Tax Guidelines payment deadlines are to be as indicated below.



Applicable Turnover

Date Payable

1st payment

1st, 2nd & 3rd months

By 20th of the 4th month

2nd payment

4th & 5th months

By 20th of the 6th month

3rd payment

6th, 7th & 8th months

By 20th of 9th month

4th payment

9th, 10th & 11th months

By 20th of the 12th month

Balance of tax

12th month

By the last day of the 4th month after the accounting period

  Table 1: Minimum Tax Computation Basis


The first minimum tax payment would have been due on 20th April 2021 for December year-ends.


Two petitions have been filed by the business community challenging the Minimum Tax law mainly on constitutional points that the law aims to charge tax on losses and not profits and would adversely affect business since the tax would have to be paid from capital, where no profits are realized.


KRA contested that the law was validly passed by Parliament and their work is to implement the same.




On 19th April 2021, the High Court of Kenya issued Conservatory Orders restricting the Kenya Revenue Authority (“KRA”) from enforcing Minimum Tax pending the hearing and determination of a case presented before it challenging the legality of the tax.


The same day, KRA issued a Press Statement indicating that they will not collect the tax until the matter, before the High Court, is heard and determined.  Persons who had already paid the tax are to retain the said amounts in their iTax account ledgers as credits.


The Judge has given strict deadlines on the hearing and determination of the case and it is likely that the Judgement will be out within three months. In the event KRA succeeds, the taxes will become payable from the first installment.


We endeavor to update you, our Esteemed Client, on any further developments on Minimum Tax.





For additional information with respect to this Alert, please contact the following:


Sandeep Khapre 

Regional CEO, BDO East Africa

Email: [email protected]   



Clifford Ah Chip 

Managing Partner, BDO East Africa Kenya 

Email: [email protected]   


Steve Okoth 

Tax Director, BDO East Africa Kenya 

Email: [email protected]   


Henry Sang 

Tax Director, BDO East Africa Kenya 

Email: [email protected]   


Peter Mwangi

Tax Manager, BDO East Africa Kenya 

Email: [email protected]   


Nzioka Muindi 

Tax Manager, BDO East Africa Kenya 

Email: [email protected]   



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This document shall not be regarded as professional advise and the reader is expected to seek specific advice. The accuracy of the information contained herein may be impacted by legal and regulatory measures put in place by the Government of Kenya.