The Finance Act, 2026 amends the Instalment Tax provisions under the Income Tax Act by removing references to the Minimum Tax regime, which is no longer in force, and replacing them with a clearer exclusion for employees whose only taxable income is employment income.
What Changed?
Previously, Section 12 referred to taxpayers who were subject to Minimum Tax.
The Finance Act, 2026 removes this obsolete reference and now provides that a person who, to the best of their judgement and belief, expects to have no taxable income other than employment income (emoluments) is not required to pay instalment tax.
Why Was This Amendment Necessary?
Minimum Tax was introduced under the Finance Act, 2020 to require certain businesses to pay tax based on their gross turnover, even where they made little or no profit.
However, the Minimum Tax regime was subsequently declared unconstitutional by the courts and ceased to apply.
The Finance Act, 2026 therefore updates the law by removing references to a tax that no longer exists, ensuring that the Income Tax Act reflects the current legal position.
Who Benefits?
- Employees whose only taxable income is salary or wages taxed under PAYE remain outside the instalment tax regime.
Tax Home Kenya Insight
This amendment does not introduce a new tax or increase existing tax obligations. Rather, it is a legislative housekeeping measure that modernises the Income Tax Act by removing outdated provisions and improving legal clarity.
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