In their endeavor to enhance revenue collection in Kenya, Kenya Revenue Authority introduced the Minimum tax, which was effective from 1st January 2021.
Here is what you need to know about the minimum tax:
- Minimum tax is a base tax, payable by all persons regardless of whether or not they make a profit. The minimum tax rate is 1% of the gross turnover of the company.
- Incomes Exempted from Minimum Tax
- Employment income
- Income that is subjected to residential rental income tax
- Income that is subject to turnover tax (Turnover Tax is applicable to businesses whose gross turnover per year is between KES 1,000,000 and KES 50,000,000; The rate is 1% of the gross turnover)
- Income that is subject to capital gains Tax
- Income of the extractives sector (oil, gas, and mining)
- Income exempted by the act; these are incomes that specified in the minimum tax act as exempt, for instance, Income from businesses whose retail price is controlled by the government and persons who are engaged in insurance business.
- The Due date for filling and Paying Minimum Tax: The tax shall be paid in quarterly installments which shall be due on the 20th of April, June, September, and December of each income year.
- Minimum Tax in relation to Installment Tax: Installment Tax is a form of advanced tax that is remitted quarterly to KRA based on the estimated or anticipated income tax at the end of the financial year. Minimum tax is still applicable even when you are paying installment tax; Note that where the installment tax payable is higher than the Minimum tax then the installment tax shall be paid and not the minimum tax. Where the Minimum tax is higher than the installment tax then the Minimum Tax shall be paid. The two taxes are meant to complement each other.