(Nairobi) – The Kenya Revenue Authority (KRA) has waived KSh 1.43 billion in taxes owed by the Kenya Electricity Generating Company (KenGen) after a protracted dispute spanning a decade. The resolution came after negotiations between the two State-run entities, supported by a partial tax amnesty that concluded in June 2024.
The waived amount represents 42.05% of the total KSh 3.41 billion initially demanded by KRA. The dispute revolved around two separate tax claims: KSh 975.85 million in withholding taxes from 2014 and KSh 2.43 billion in compensating taxes from 2016.
KenGen sought Treasury intervention for a complete waiver but was directed to negotiate a settlement with KRA. According to disclosures made to investors, Treasury recommended that KRA consider waiving penalties and interest only after KenGen settled the principal tax.
After a series of meetings, KRA reduced its withholding tax demand by 85.28% to KSh 143.66 million, including:
| Tax Component | Amount (KSh) |
|---|---|
| Principal Tax | 69.48 million |
| Penalties | 4.71 million |
| Interest | 69.48 million |
KenGen paid the principal and penalties by June 24, 2022, leaving the interest unpaid. Under the Finance Act 2023, which introduced a tax amnesty effective September 2023 to June 2024, KenGen successfully applied for a waiver of the remaining KSh 69.48 million interest.
The company also resolved its KSh 2.43 billion compensating tax dispute. This tax, in effect since 1992, applies to dividends distributed from untaxed income due to government incentives. KenGen cleared the principal amount by June 2024, qualifying for an additional waiver of KSh 530.81 million in penalties and interest.
KenGen is 70% government-owned and listed on the Nairobi Stock Exchange. The settlement was part of a broader tax amnesty program by President William Ruto’s administration, which allowed taxpayers to clear arrears accumulated up to December 2022 without incurring penalties or interest if the principal tax was paid within the amnesty window.
KRA documents reveal that more than 1.06 million taxpayers with KSh 54.50 billion in arrears applied for the amnesty. By June 2024, KRA collected KSh 43.93 billion, leaving 19.41% (KSh 10.58 billion) of the arrears unpaid.
The tax authority had warned that taxpayers failing to honor their payments during the amnesty period would face enforcement actions, including deactivating Personal Identification Numbers (PINs), imposing travel bans, seizing funds from bank accounts, and pursuing legal action.