The High Court of Kenya has ruled that the minimum tax provision provisions are unconstitutional.
The provision was intended at levying a minimum tax of 1 per cent on total sales by a business.
Justice George Odunga ruled on Monday that the tax, which was due to become effective at the beginning the year, stands annulled.
Justice Odunga said the minimum tax results in diminishing capital for those making losses as the people making profits remain unaffected.
This comes as a relief for business owner who challenged the new tax in court arguing that it was unconstitutional, devastating and unlawful.
The court further issued orders restraining KRA from enforcing Section 12D of the Income Tax Act.
The move could have generated approximately Sh21 billion annually for the Treasury through the taxman.
However, according to the lawmakers, the tax would have seen companies that report losses keep contributing towards government programs