The Finance Act 2020 presented the Minimal Tax, a base source of revenue tax that might be payable via all individuals to the Kenya Income Authority (KRA) on a quarterly foundation without reference to whether or not they make earnings or now not. The purpose of this tax is to verify equity and fairness throughout all taxpayers and might be charged on the charge of one% of the gross turnover of the corporate. The creation of this tax was once a remedial measure to deal with shortcomings related to self-assessments of tax on industry earning.
The tax is a last tax and will likely be paid in installments that might be due at the 20th day of every duration finishing at the 4th, 6th, 9th and 12th month of the yr of source of revenue.
Who’s eligible for Minimal tax?
This tax is meant for taxpayers who’re wearing out industry and incomes earnings however their tax payable is not up to 1% in their gross turnover.
This tax might be charged along instalment tax, such that it’ll be acceptable whether it is greater than the installment tax.
Evaluating Installment tax and minimal tax
Whilst each minimal tax and installment tax are payable via the 20 th day after each and every quarter of the accounting yr, this is, (after the fourth, 6th, 9th and 12th month), they may be able to be differentiated as follows;
| Minimal Tax | Installment Tax | |
| 1. | Minimal tax is a last tax | Installment tax is an advance tax |
| 2. | Computed at 1% of gross turnover | Computed in line with estimated tax payable for a yr of source of revenue |
| 3. | Minimal tax is for companies incomes earnings however whose tax legal responsibility is under 1% in their gross turnover | Installment tax is paid via individuals who’ve tax payable for any yr that quantities to KES 40,000 and above. |
Will minimal tax outcome into double taxation?
There might be no circumstances of double taxation since most effective the upper of the 2 taxes might be payable to KRA.
For example, the place installment tax payable is upper than the minimal tax, then a tax payer shall pay installment tax. On the other hand, if the minimal tax is upper than the installment tax then a taxpayer pays the minimal tax.
State of affairs
Which tax between minimal tax and instalment tax is acceptable for corporate A with a gross turnover of Kshs 1,500,000 and with various earnings as illustrated under?
| Tax >1p.cgross turnover | 1p.cgross turnover> tax | Tax <1p.cgross turnover | |
| Corporate A | Corporate A | Corporate A | |
| Gross Turnover | 1,500,000 | 1,500,000 | 1,500,000 |
| Much less Value of Gross sales | (1,050,000) | (1,050,000) | (1,300,000) |
| Gross benefit | 450,000 | 450,000 | 200,000 |
| Much less Working Bills | (150,000) | (420,000) | (250,000) |
| Web Benefit/(Loss) | 300,000 | 30,000 | (50,000) |
| Company Source of revenue Tax @ 30% | 90,000 | 9,000 | – |
| Minimal Tax @ 1% gross turnover | 15,000 | 15,000 | 15,000 |
| Tax Acceptable | 90,000 | 15,000 | 15,000 |
Earning Exempt from Minimal Tax
The next earning are exempt from the thisTax;
- Source of revenue exempted via the Act
- Employment source of revenue
- Source of revenue this is matter to Residential Condominium Source of revenue Tax
- Source of revenue this is matter to Turnover Tax
- Source of revenue this is matter to Capital Features Tax
- Source of revenue of extractives sector
For more info relating to this alert, please touch;
Beatrice Kamau
Outsourced Services and products Supervisor
t +254 715 248882 | +254 733 533449
