This is tax paid at the rate of 1% of gross turnover/sales by business entities based in the country whether or not they make a profit effective 1st January 2021.
The tax is paid in four instalments as follows.
20th of the 4th month of the year of income
20th of the 6th month of the year of income
20th of the 9th month of the year of income
20th of the 12th month of the year of income
However, Minimum Tax does not apply on the following incomes
- Employment income
- Income subject to turnover tax
- Income subject to Capital Gains Tax
- Income subject to Residential Rental Income
- Income exempted from tax
- Income from the mining and petroleum activities
- Persons engaged in business whose retail price is controlled by the government.
- Persons engaged in insurance business.
NOTE: For businesses subject to Instalment tax, they shall compare minimum tax and instalment tax and remit whichever is higher.
Minimum tax was introduced to expand the country’s tax-base thus increasing revenue which supports growth and development.
In the past businesses that made losses never used to pay any tax but with minimum tax as long as a business is making sales, it shall be obliged to pay tax even if they make losses at their year-end. This way, the tax burden shall be equitably distributed.
We encourage businesses and individuals with other sources of income apart from the ones exempted to comply with KRA to avoid penalties and interests where they might end up paying huge taxes thus affecting their businesses.
For further information and assistance on Minimum Tax kindly reach us through;
Phone number: 0721587039