Treasury CS Ukur Yattani has introduced a new tax that will affect all businesses, whether one makes a profit or not. The CS introduced the Minimum Tax while addressing the media during the National Taxpayers Day on Thursday, November 6.
The rate of Minimum Tax is 1% of the gross turnover of the company. The government will start collecting the tax on January 1, 2021.
The tax shall be paid in instalment and shall be due on the 20th day of each period ending on the 4th, 6th, 9th and 12th month of the year of income.
Speaking with Kenyans.co.ke, Nairobi-based Financial Expert and Somakazi CEO Nicholas Gachara explained that the tax was introduced due to companies declaring losses and filing nil returns. Declaration of losses exempts businesses from paying taxes.Kenya Revenue Authority signage on a building
"Tax is payable on profits only. Loses can be carried forward to up to 10 years and businesses end up not paying taxes," Gachara explained.
The Kenya Revenue Authority (KRA) explained that the tax is meant to foster equity and fairness in the tax system as everyone pays a base tax whether they earn a profit or not.
It also clarified that Instalment Tax is still applicable and payable. Installment tax is estimated income tax paid to KRA periodically, in anticipation of the tax payable for a year of income.
"Where the Instalment Tax payable by a person is higher than the Minimum Tax, then the person shall pay Instalment Tax; however, where the Minimum Tax is higher than the Instalment Tax, then the Minimum Tax shall be payable," KRA explained.
It added that the following incomes are exempted from Minimum Tax. Employment Income, Income that is subject to Residential Rental Income Tax, Income that is subject to Turnover Tax, Income that is subject to Turnover Tax, Income subject to Capital Gains Tax and Incomes of extractives sector.
The Minimum Tax is part of the new diverse revenue enhancement measures mooted by the National Treasury.
Others include leveraging on information technology to improve revenue collection through the use of third party data and automation of processes to improve Value Added Tax collection (VAT), comprehensive audit of exemptions to identify multiple uses of single exemption and making relevant tax demand and integration of government systems to allow for the third-party data matching to improve service delivery.
President Uhuru Kenyatta commended all compliant taxpayers for their high sense of civic duty and fidelity to the tax laws which have cushioned the country from Covid-19 effects.
He also applauded the KRA for maintaining its tradition of excellence in tax administration despite the country facing the Covid-19 crisis. KRA hit a new record high in the collection of tax amassing Ksh 1.607 trillion for the financial year 2019/2020 as compared to Ksh 1.580 trillion collected over the same period between July 2018 and July 2019.Central Bank of Kenya (CBK) building in Nairobi.Simon KiraguKenyans.co.ke
- tragedy20 September 2021 - 10:28 pm
- CONTINENTAL GIANT20 September 2021 - 7:10 pm
- FACE OFF20 September 2021 - 6:28 pm
- Revealed20 September 2021 - 5:52 pm
- Voice of the Mountain20 September 2021 - 5:30 pm
- DIRECTIVE20 September 2021 - 4:11 pm
- RESCUED20 September 2021 - 3:28 pm
- Next phase20 September 2021 - 2:16 pm
- Change of tact20 September 2021 - 1:24 pm
- Interruptions20 September 2021 - 12:53 pm
- Congrats20 September 2021 - 1:05 pm
- SHOCKING20 September 2021 - 12:45 pm