ADVOKS GLOBAL · KENYA
Income Tax Act
12G. Minimum top-up tax
Edition: 2026-07-01 · In force
12G. Minimum top-up tax
(1)Notwithstanding any other provision of this Act, a tax known as minimum top-up tax shall be payable by a covered person where the combined effective tax rate in respect of that person for a year of income is less than fifteen per cent.(2)The combined effective tax rate for a covered person shall be the sum of all the adjusted covered taxes, divided by the sum of all net income or loss for the year of income, multiplied by a hundred.(3)The amount of tax payable shall be the difference between fifteen per cent of the net income or loss for the year of income of a covered person, and the combined effective tax rate for the year of income, multiplied by the excess profit of the covered persons.(3A)Minimum top-up tax shall be payable by the end of the fourth month after the end of the year of income.(4)This section shall not apply—(a)to a public entity that is not engaged in business;(b)to a person whose income is exempt from tax under paragraph 10 of the First Schedule;(c)to a pension fund and the assets of that pension fund;(d)to a real estate investment vehicle that is an ultimate parent entity;(e)to a non-operating investment holding company;(f)to an investment fund that is an ultimate parent entity;(g)to a sovereign wealth fund; or(h)to an intergovernmental or supranational organisation including a wholly owned agency or organ of the intergovernmental or supranational organisation.(5)In this section—“adjusted covered taxes” means taxes recorded in the financial accounts of a covered person for the income, profits, or share of the income or profits of a covered person where the covered person owns an interest, and includes taxes on distributed profits, deemed profit distributions under this Act subject to such adjustments as may be prescribed;“covered person” means a resident person or a person with a permanent establishment in Kenya who is a member of a multinational group and the group has a consolidated annual turnover of seven hundred and fifty million Euros or more in the consolidated financial statements of the ultimate parent entity in at least two of the four years of income immediately preceding the tested year of income;“net income or loss” means the sum net income or loss for the year of income after deducting the sum of the losses of a covered person as determined under a recognised accounting standards in Kenya; and“excess profit” means the net income or loss of a covered person for the year of income less—(a)ten per cent for the employee costs; and(b)eight per cent for the net book value of tangible assets:Provided that the employee cost and book value of tangible assets may be adjusted as prescribed in regulations.