KenGen gets Sh1.43bn tax waiver

KenGen

Kenya Electricity Generating Company (KenGen) logo on its headquarters.

Photo credit: File | Nation Media Group

The Kenya Revenue Authority waived Sh1.43 billion in accumulated taxes by Kenya Electricity Generating Company (KenGen) following a review between the two State-run entities and a partial tax pardon, which ended June 2024, ending a decade-long dispute.

The abandoned claims represent 42.05 percent of cumulative Sh3.41 billion that KRA initially pursued in separate demands. The disputed tax demands comprised Sh975.85 million in withholding taxes in 2014 and Sh2.43 billion compensating taxes in 2016.

Treasury declined to intervene in the two disputes following pleas from KenGen for a total waiver, directing the two entities to negotiate and reach a repayment plan.

“The application for abandonment of collection of tax was declined by the National Treasury and Planning which directed Kenya Revenue Authority and KenGen to enter into a payment plan to settle the principal tax with the waiver of penalty and interest to be considered after full settlement of principal tax,” KenGen says in the latest disclosures to investors.

The State-run electricity producer says that various meetings with KRA resulted in the taxman lowering withholding tax demand by 85.28 percent to Sh143.66 million.

The renegotiated amount comprised Sh69.48 million principal tax, Sh4.71 million in penalties and Sh69.48 million in accumulated interest.

The power generator says it cleared the principal tax and penalty on June 24, 2022, leaving arrears in interest which were waived under the partial tax amnesty which was in place between September 2023 and June 2024.

“KenGen applied and successfully received the waiver of the outstanding interest of Sh69,478,227 as a result of the amnesty introduced by the Finance Act 2023. Therefore, the issue was officially closed,” KenGen says.

The utility also successfully applied for the waiver of Sh530.81 million in penalties and interest which had accumulated on Sh2.43 billion compensating tax obligation since 2016 after the firm paid Treasury Sh5.74 billion in dividend.

Compensating tax, which has been in force since 1992, applies to firms which distribute dividend to shareholders from income which was not taxed as a result of incentives given by the government.

The publicly-traded firm, 70 percent owned by the State, says it completed payment of principal compensating tax of Sh2.43 billion in June 2024, qualifying for a tax amnesty for Sh530.81 million in accumulated penalties and interest.

President William Ruto's administration offered a partial tax amnesty between September 2023 and June 2024 for companies and individuals with arrears up to December 2022 on condition that they pay up the principal amount.

KRA, in return, waived accumulated penalties and interest upon clearance of the principal sums made before the lapse of the forgiveness window on June 30, 2024.

KenGen was among slightly more than 1.06 million taxpayers with principal taxes in arrears amounting Sh54.50 billion who applied for the partial tax pardon during the 10-month window through June 2024,according to the KRA documents.

However, the revenue agency received Sh43.93 billion payments by end of June, indicating that a fifth (19.41 percent), or Sh10.58 billion, of the principal tax debts were not remitted.

KRA had warned that taxpayers who apply for tax amnesty and fail to honour payment by end of the window in June 2024 would be subjected to enforcement measures.

Section 42 of Tax Procedures Act empowers the KRA to deactivate PINs, issue travel bans, collect cash due from taxpayer’s banker and prosecute if the taxman has reasonable ground that he will default.

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