The Kenya Revenue Authority (KRA) has raised a tax claim of Sh23.1 billion following the sale of Tullow Oil’s Kenyan operations to Auron Energy E&P Limited, a subsidiary of Gulf Energy Ltd, in 2025.
The Authority presented its findings to Parliament amid ongoing debates on safeguarding government earnings from the oil sector.
KRA officials, appearing before the Joint Committee of Parliament on February 12, explained that the assessment was based on a thorough audit spanning the period from 2020 to 2025.
“In 2025, the Authority carried out a tax audit on the taxpayer for the period 2020 to 2025 and raised taxes amounting to Sh23,124,656,330,” the officials told lawmakers.
The assessment comprises Sh4.6 billion in Capital Gains Tax, Sh18.3 billion in Value Added Tax, and Sh128.5 million in Withholding Tax. The taxpayer has formally challenged the assessment, which is still under review.
“The taxpayer has since objected to the taxes raised, and the objection is currently pending review,” KRA confirmed.
Tullow Kenya BV operated Blocks 10BB, 13T, and 10BA and is a branch of the Netherlands-based Tullow Overseas Holding BV, ultimately owned by Tullow Oil PLC, listed on the London Stock Exchange.
The firm had previously collaborated with Africa Oil Kenya BV and Total Energies, both of which exited before 2025, leaving Tullow as the sole operator.
The 2025 sale of Tullow’s Kenyan business to Auron Energy E&P Limited was set at a minimum of $120 million (Sh15.4 billion), structured in three instalments: $40 million (Sh5.1 billion) at completion, $40 million (Sh5.1 billion) by June 2026, and the remaining $40 million (Sh5.1 billion) at the start of production.
The agreement also provides quarterly royalties of $0.5 (Sh65) per barrel multiplied by 80 per cent of production, while Tullow retains a 30 per cent “back-in right” for future development stages.
KRA highlighted that oil companies have received large import tax exemptions, with Tullow Kenya BV benefiting from Sh9.9 billion, Eni Kenya BV from Sh1.22 billion, and Anadarko Kenya from Sh1.34 billion, totalling Sh12.47 billion across the sector. On transfer pricing concerns, KRA assured Parliament that monitoring mechanisms are robust.
“There are adequate measures to monitor and audit transfer pricing risks, particularly in relation to drilling services, logistics, procurement and inter-company management fees,” the officials said.
The Authority stressed compliance with Section 18(3) of the Income Tax Act, which requires related-party transactions to be conducted at arm’s length.
“KRA will continue to enforce the arm’s length principle on all transactions between related parties,” the officials added.
To strengthen revenue collection, KRA proposed reforms, including revoking Legal Notice No. 91 of 2015, which exempts interest on foreign loans in sectors like oil from withholding tax.
“No exemption should be granted on withholding taxes for both local and imported services,” officials told the Committee. Further proposals include amending Section 16(2)(j)(v) of the Income Tax Act and reviewing the Ninth Schedule to reflect current exploration practices.
“KRA will work closely with other stakeholders to safeguard the government’s share of revenues from future crude oil sales,” the officials said, highlighting the importance of protecting public resources as the sector nears full-scale commercial production.
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