Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 21, 2021

High Court of Kenya declares that minimum tax is unconstitutional

Executive summary

On 20 September 2021, the High Court of Kenya in Machakos (the High Court) declared that the minimum tax provisions as stipulated in section 12D of the Kenya Income Tax Act (KITA) and the minimum tax guidelines are unconstitutional. The High Court therefore barred the Kenya Revenue Authority (KRA) from implementing the said provisions.

This followed a petition by several affected and interested parties who sought relief from the implementation of the minimum tax due to the adverse effects it would have on their businesses.

Detailed discussion


The Finance Act, 2020, introduced Section 12D of the KITA which provides for the payment of minimum tax at the rate of 1% of the gross turnover. There was, however, a drafting error which hindered the implementation of the law since it provided that a person is liable to pay minimum tax equal to 1% of gross turnover if the person’s installment tax is higher than 1% of gross turnover. The Tax Laws (Amendment) (No. 2) Act, 2020, rectified the drafting error by providing that minimum tax is payable if installment taxes are lower than 1% of the gross turnover.

In January 2021, the KRA published guidelines which were meant to provide clarity on various issues including the definition of gross turnover, and exemptions of certain income items from the minimum tax regime. The income items which were exempt from minimum tax include: income that is exempt under the KITA, employment income, income subject to residential income tax, income subject to turnover tax, income subject to capital gains tax, and income from extractive industries. It also exempts persons engaged in business whose retail price is controlled by Government and persons engaged in insurance business.

To stop the implementation of minimum tax, the petitioners filed a petition at the High Court challenging the constitutionality of the minimum tax provisions and guidelines. On 19 April 2021, the High Court issued conservatory orders restraining the KRA from the implementation, administration and/or enforcement of Section 12D of the KITA pending the hearing and determination of the case. 

High Court decision

On 20 September 2021, the High Court made its final determination that the legislative amendments introduced in Section 12D of the KITA violates Article 201(b)(i) of the Constitution. This is because the application of this provision violates the principle of fair treatment, particularly affecting businesses in a loss-making position.

In addition, the High Court also made the determination that failure by the Respondents to comply with public participation requirements in line with the provisions of the Statutory Instruments Act rendered the minimum tax guidelines null and void.

Next steps

The Respondent has indicated that they will appeal the decision in the Court of Appeal. In the meantime, this landmark ruling has put a halt to the implementation of the minimum tax provisions and minimum tax guidelines, pending any further directions or determination at the Court of Appeal.


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

 Ernst & Young (Kenya), Nairobi

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

Ernst & Young LLP (United States), Pan African Tax Desk, New York


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more