Tullow Oil has challenged a tax assessment of about Ksh23 billion issued by the Kenya Revenue Authority (KRA) over the sale of its Kenyan business.

The dispute relates to the company’s disposal of its full shareholding in Tullow Kenya BV to Gulf Energy Group in a deal with a minimum consideration of $120 million (Ksh15.5 billion).

In a statement, the company said it had been notified of the tax demand, which it said was linked to alleged unpaid VAT and Capital Gains Tax arising from the transaction.

“The Group is aware of a tax assessment for $170 million (Ksh21.96 billion) from the Kenya Revenue Authority relating to alleged underpaid VAT and Capital Gains Tax on the disposal of its 100% shareholding in its Kenyan subsidiary, Tullow Kenya BV, to the Gulf Energy Group for a minimum consideration of $120 million (Ksh15.5 billion),” the statement read.

In its audit covering the period 2020 to 2025, KRA demanded a total of $141.6 million (Ksh18.29 billion) in Value Added Tax (VAT), $35.6 million (Ksh4.6 billion) in Capital Gains Tax (CGT), and about $1 million (Ksh129.15 million) in Withholding Tax.

Tullow said it strongly disagreed with the assessment and would formally challenge it together with Gulf Energy through the objection process.

“The Group’s clear and firm position is that the assessment is wholly without merit, and it intends in conjunction with Gulf Energy to contest the assessment through the regular objection process,” the statement added.

The company also stated that it does not expect any immediate financial impact from filing the objections or from the appeals process.

“There will be no cash outflow in respect of lodging these objections, nor does the Group expect cash outflow on completion of its appeal process. Therefore, a provision for uncertain tax treatments in respect of this risk has not been recorded,” the statement concluded.