Parliamentary Committee clears path for KQ tax exemption


Parliamentary Committee clears path for KQ tax exemption
File image of Kenya Airways plane. PHOTO| COURTESY

In Summary

  • The Planning Ministry made the proposal through Legal Notice No.27 of 2021 which sort to exempt an airline and its subsidiaries in which the government holds at least a 45 per cent stake from the minimum tax.
  • The national carrier requested exemption from the Treasury citing the impact of the COVID-19 pandemic on the aviation industry along with its role in the economy including marketing Kenya as a tourist destination and trade facilitation.
  • If adopted, the exemption is expected to extend to KQ subsidiaries including Jambojet in which it holds a 100 per cent stake, Kenya Airfreight Handling Limited and African Cargo Handling Limited.

The National Assembly Committee on Delegated Legislation has cleared the way for the exemption of Kenya Airways (KQ) and its subsidiaries from minimum tax.

In its report tabled on the floor of the house last week, the Committee has recommended that Members of Parliament (MPs) approve the exemption which was first sponsored by the National Treasury.

The Planning Ministry made the proposal through Legal Notice No.27 of 2021 which sort to exempt an airline and its subsidiaries in which the government holds at least a 45 per cent stake from the minimum tax.

The national carrier requested exemption from the Treasury citing the impact of the COVID-19 pandemic on the aviation industry along with its role in the economy including marketing Kenya as a tourist destination and trade facilitation.

If adopted, the exemption is expected to extend to KQ subsidiaries including Jambojet in which it holds a 100 per cent stake, Kenya Airfreight Handling Limited and African Cargo Handling Limited.

Others are, KenCargo Airlines International Limited and Fahari Aviation Limited (Pride Oil Limited).

The grant of the exemption by the Committee was nevertheless against concerns raised during public participation including the discrimination of other airlines and the persistent financial constraints facing the airline long before the advent of the pandemic.

The Committee has however anchored the exemption request to cover the national carrier on subsidies extended to State linked carriers in other jurisdictions around the world.

This include the waiver of all landing and parking fees between April and December last year by the Seychelles government, Ksh.13.7 billion ($128 million) relief for tourism and air transport sectors in Senegal and the Ksh.1.2 trillion (9 billion Euro) bailout of Lufthansa by Germany.

The implementation of minimum tax on other enterprises meanwhile remains in limbo following a petition by the Isinya Sub-County Bar Owners Association who challenged the constitutionality and validity of the new tax provision effected through the 2020 Finance Act.

The petitioners have argued the tax fails to meet the threshold of income tax by subjecting loss making entities to taxation.

The petition is expected to feature on Wednesday when parties to the suit highlight their submissions in courts.

The minimum tax is charged at the rate of one per cent on companies gross turnovers irrespective of their profitability position and falls due on the 20th day of the month following the end of a quarter of operations.

The first payments for the tax fell due on April 20 but were thwarted by the court petition.

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