Kenya Electricity Generating Company (KenGen) has successfully reached a landmark agreement with the Kenya Revenue Authority (KRA), securing a substantial tax waiver of Sh1.43 billion.

This development closes the book on a decade-long dispute, providing much-needed financial relief for the government-owned company.

The resolution, which follows extensive negotiations, stems from a broader tax amnesty programme introduced by the government.

KenGen, which faced a Sh3.41 billion tax demand from KRA, will now pay only 57.95 per cent of the original sum, following a major reduction in penalties and interest.

The waived amount is a significant part of the Sh975.85 million withheld taxes from 2014 and Sh2.43 billion in compensating taxes from 2016.

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KenGen had initially appealed to the Treasury for a full tax waiver, but the government directed the company to engage directly with KRA.

The Treasury's stance was clear: KenGen could only receive relief from penalties and interest once the principal tax was paid.

After a series of discussions, KRA made notable concessions, reducing its withholding tax demand by 85.28 per cent, leaving KenGen with a more manageable figure of Sh143.66 million.

This sum includes the principal tax (Sh69.48 million), penalties (Sh4.71 million), and interest (Sh69.48 million).

KenGen promptly cleared the principal tax and penalties by June 24, 2022, but the interest remained unpaid until the Finance Act 2023 tax amnesty was enacted.

The amnesty, in effect from September 2023 to June 2024, allowed KenGen to apply for a waiver of the remaining Sh69.48 million in interest, a move that was granted.

KenGen also managed to settle its Sh2.43 billion compensating tax issue, a tax stemming from dividends distributed from untaxed income under government incentives.

By June 2024, KenGen had cleared the principal amount, qualifying for an additional Sh530.81 million waiver on penalties and interest.

The settlement is part of President William Ruto’s wider tax amnesty initiative, which encouraged taxpayers to clear arrears accumulated up to December 2022.

The programme allowed those who paid the principal tax within the amnesty window to avoid additional penalties and interest.

Figures from KRA indicate that over 1.06 million taxpayers participated in the amnesty, collectively holding Sh54.50 billion in arrears.

By June 2024, the tax authority had collected Sh43.93 billion, while Sh10.58 billion remained unpaid.

Those who failed to comply were warned that they would face severe enforcement actions, including the deactivation of Personal Identification Numbers (PINs), travel bans, and the seizure of funds from bank accounts.

As a 70 per cent government-owned entity listed on the Nairobi Stock Exchange, KenGen’s successful tax resolution highlights the impact of the government’s tax amnesty programme.

It also underscores KRA’s role in facilitating compliance while providing a means for taxpayers to settle historical disputes without facing crippling penalties.