House team backs KQ’s exemption from new tax
Mercy Mwai @wangumarci
Kenya Airway (KQ) and its subsidiaries will be exempted from paying minimum taxes to cushion the company until it returns to profitability if legislators approve a report by a Parliamentary committee that acceded to this request.
The Committee on Delegated Legislation, chaired by Tiaty MP Kassait Kamket, approved Legal Notice No. 27 of 2021 from the National Treasury seeking to exempt “an airline in which the government of Kenya owes at least 45 per cent of its shares and the subsidiaries of the airline” from the minimum tax imposed under section 12(d) of the income tax act.
The subsidiaries set to benefit from the exemptions include Kenya Air Freight Handling which deals with Cargo handling for perishable products which KQ has 51 per cent shareholding, Jambojet, African Cargo Handling Ltd, dormant Kencargo Airlines International Limited and Fahari Aviation Ltd that deals with drone and emerging technologies in the aviation sector.
“Having examined legal notice number 27 of 2021 with the constitution of Kenya, the interpretations and General provisions Act (cap2), the income tax Act (cap 470) and the statutory Instruments Act (No 23 of 2013, the committee recommends that the house approves the said statutory instruments in accordance with section 13(2) of the Income Tax Act (cap 470),” reads the committee recommendation in part.
“The legal notice seeks to exempt from income tax derived or accrued from Kenya the provision of section 12D of the income Tax Act (Cap 47) which introduces minimum tax payable by all entities regardless of whether they are in a profit making position or not,” adds the report.
In its submission to the committee, KQ said its request is due to a number of reasons, which have negatively affected business and thus made it impossible for it to continue its operations.
Among the grounds the airline cited include the Covid-19 pandemic, which affected operations of airlines worldwide thus worsening the financial position of the company which is already ailing as it has been making losses in the recent past.
The airline said it ought to be exempted as it continued to pay lease expenses even during suspension of all international operations due to corona virus in addition to other costs such as regular inspections of aircrafts in compliance with international regulations thus increasing the likelihood of making losses.
Further it explained that paying the minimum taxes would render the company’s operations unsustainable considering its financial operations.
“Kenya Airways Ltd as the national career plays a vital role in the economy through marketing Kenya as a tourism destination, trade facilitation, job creation among others.
It is because of its important role in the economy that the government as a majority shareholder has continued to provide incentives and bail it out to finance its operations despite making losses over time.
It was therefore considered prudent to grant the exemptions from minimum tax to help the company continue its operations until it returns to profitability” reads the report in part.
While defending the request, National Treasury Cabinet Secretary Ukur Yatani said told the MPs that the government guaranteed the company a loan of Sh75 billion, which is yet to be repaid, adding that apart from Kenya other countries have also injected funds to protect their national carriers during the pandemic.
