Kenya Electricity Generating Company (KenGen) is seeking a waiver on Sh530.8 million pending taxes to the Kenya Revenue Authority (KRA), following the implementation of the Finance Act, 2023.
The arrears relate to penalties and interest that have been accumulating since 2016. KenGen said that since it had already cleared the principal before December 2022, it qualifies for the waiver as stipulated by the Act.
“The Finance Act, 2023 has provided an amnesty on the penalties and interest for taxes which were settled by 31st December 2022. Since KenGen settled the principal tax before 31st December 2022, it qualifies for amnesty,” said the company.
“This provision takes effect on September 1, 2023. On this basis no provision for the interest has been made,” it said.
KenGen was slapped with a compensating tax of Sh2.43 billion in 2016 when it paid a dividend of Sh5.73 billion to the National Treasury, which holds a 70 percent stake in the company on behalf of the government.
A compensating tax is a secondary levy that is charged upon the distribution of untaxed income and largely arises when dividends are paid out of untaxed profits or reserves.
In Kengen’s case, the tax became payable after the company paid dividends to the Treasury yet it had benefited from massive investment deductions on its capital projects in the preceding years.
A petition by the company to the Treasury to forgive the tax failed, with the exchequer instead directing it to enter into a settlement plan with KRA.
KenGen has unsuccessfully sought KRA to waive the interest and penalty amounting to Sh530.8 million but now wants a waiver which has been provided for in the Finance Act, 2023.
“As of June 30, 2023, the company had completed the settlement of the principal tax of Sh2.431 billion. Thereafter KenGen applied for waiver of penalties and interest of Sh530.805 million which is currently being processed by KRA,” it said.
The Act introduced a tax amnesty for interest and penalties on tax debt. The amnesty took effect on September 1, 2023.
Through the programme, taxpayers who have no outstanding principal tax for the period to December 31, 2022, but have penalties and interest qualify for the waiver.
KRA last month revealed it had already netted Sh3.4 billion from the programme that ends in June 2024, even as more than 17,000 taxpayers applied for the amnesty.
The tax agency said it has identified 2.8 million taxpayers who have penalties and interest and qualify for the tax amnesty programme.
KenGen also revealed that it has slapped Kenya Power with a Sh364.6 million penalty in the year ended June for late payment of electricity supplied, marking the latest of such charges.
The power producer had charged the electricity distributor Sh847.9 million a year earlier. The late payments and attendant penalties have served to raise Kenya Power’s costs.
“Interest income from the Kenya Power and Lighting Company Plc relates to interest penalties charged to Kenya Power due to late payments of invoices,” says KenGen in its latest annual report.
“Interest on late payments accrues after 40 days after billing and Kenya Power acknowledging invoice or lapse of credit period.”
