Tax exemption For Kengen Removed in Finance Act 2020
The finance Act 2020 has taken away all tax exemptions on electricity plants and introduced new ones. Kengen, which is a giant power producer in the country is now expected to pay millions of taxes.
This move will end the firm’s previous practice of paying the taxes and later claiming refunds, with the amounts boosting its “other income” when they are received from Kenya Revenue Authority.
For instance during the year ended 30th June 2019, KenGen received kes 391 million refund after claiming Railway Development Levy (RDL) on equipment imported and used to build the 280-megawatt Olkaria geothermal power plant.
The Finance Act 2020 which took effect as from 1st July 2020, has introduced a minimum tax of 1% of turnover payable on a monthly basis. It has also introduced strict requirements on the collection of input VAT, withdrawal of VAT exemption and the withdrawal of the exemption of import Declaration Feed and Railway Development Levy.
KenGen has kes 88.9 billion worth of pending power plants in the review period and will now pay all the relevant taxes on the projects. The Railway Development Levy is taxed at a rate of between 1.5 % and 2 % of the value of imported goods depending on whether they are raw materials or finished products.
Only currency notes and coins imported by the Central Bank of Kenya and equipment, machinery and motor vehicles for the official use by the Kenya Defence Forces and National Police Service continue to be exempt from RDL.