Electricity producer Kenya Electricity Generating Company (KenGen) #ticker:KEGN is optimistic of a reprieve from the taxman who is demanding Sh2.43 billion tax as well as penalties and interest.
The Nairobi Securities Exchange-listed firm attracted the compensation tax after paying dividend arrears to the Treasury last year.
KenGen paid dividend of Sh6.164 billion, according to an audit report by the Auditor General on the company for the year ended June 2017. It has been negotiating for a waiver of penalty and interest by the Kenya Revenue Authority in talks that started a year ago.
KenGen’s Finance and ICT director John Mudany said if the company secures the waiver from the Kenya Revenue Authority (KRA) it would allocate the undisclosed funds to its ongoing capital intensive projects.
“We are still in discussions. We are hopeful they will look at it with favour,” Mr Mudany said an in interview.
“If we are forgiven, we will invest the money into putting up more power plants and achieving the governments own vision of cheap energy. The money can do a lot.”
Compensating tax is a secondary levy charged upon the distribution of untaxed income. It largely arises when dividends are paid out of untaxed profits or reserves.
KenGen has benefited from massive investment deductions on its capital projects in recent years.
The Auditor- General stated in his report on KenGen that Kenya Revenue Authority, which had earlier issued a demand letter for the payment of the principal amount of the tax, interest and accruing penalties, had dug in on its position over the payment.
“The company has not received the waiver in respect of interest and penalties. I understand from management that KRA has indicated willingness to waive the interest and penalties if the principal tax is paid,” said the Auditor- General.