NAIROBI, Kenya – The Kenya Revenue Authority (KRA) is seeking Parliament’s approval to tax churches and Public Benefit Organisations (PBOs) that have ventured into business activities, arguing that some of these entities have strayed from their charitable mandates.
KRA is pushing for the adoption of the Income Tax (Charitable Organisations and Donations Exemptions) Rules 2024, which were published on June 18, 2024, replacing the previous 2007 regulations.
These rules outline new criteria for charitable organisations to qualify for tax exemptions and provide guidelines on how donations made to these organisations can be considered for tax deductions.
The current regulations exempt organisations engaged in religious activities, education, and poverty eradication from taxation.
However, KRA Deputy Commissioner Maurice Oray highlighted to the National Assembly Committee on Delegated Legislation that some churches and PBOs have expanded into commercial ventures, including building parking spaces and hotels, straying from their core missions.
“There is a need to regulate the activities of these organisations while still respecting the provisions in the Act,” Oray told the committee, citing examples like Holy Family Basilica, which operates commercial parking but continues to benefit from tax exemptions.
While religious institutions and educational bodies currently enjoy tax-free status, KRA emphasized that not all schools are eligible.
For-profit schools, for instance, do not qualify, while those that reinvest income into the institution may remain exempt.
“For a school to qualify, it must demonstrate that its activities provide 100 percent public benefit and meet requirements such as filing annual tax returns,” Oray explained.
The new regulations also offer tax relief for individuals and businesses donating to licensed charitable organisations, allowing them to claim the donations as deductions in their tax computations.
Despite the proposals, MPs on the committee voiced concerns over other tax regulations, including the proposed Electronic Tax Invoices (eTims) system, which they criticized for lacking a clear operational framework, especially for small businesses in the informal sector.
KRA Commissioner General Humphrey Wattanga defended the eTims system, stressing that real-time invoicing would help streamline tax collection across all businesses, but the MPs remained unconvinced, threatening to block the proposal if it did not address the challenges faced by informal traders.
KRA is pushing for the adoption of the Income Tax (Charitable Organisations and Donations Exemptions) Rules 2024, which were published on June 18, 2024, replacing the previous 2007 regulations.
These rules outline new criteria for charitable organisations to qualify for tax exemptions and provide guidelines on how donations made to these organisations can be considered for tax deductions.
The current regulations exempt organisations engaged in religious activities, education, and poverty eradication from taxation.
However, KRA Deputy Commissioner Maurice Oray highlighted to the National Assembly Committee on Delegated Legislation that some churches and PBOs have expanded into commercial ventures, including building parking spaces and hotels, straying from their core missions.
“There is a need to regulate the activities of these organisations while still respecting the provisions in the Act,” Oray told the committee, citing examples like Holy Family Basilica, which operates commercial parking but continues to benefit from tax exemptions.
While religious institutions and educational bodies currently enjoy tax-free status, KRA emphasized that not all schools are eligible.
For-profit schools, for instance, do not qualify, while those that reinvest income into the institution may remain exempt.
“For a school to qualify, it must demonstrate that its activities provide 100 percent public benefit and meet requirements such as filing annual tax returns,” Oray explained.
The new regulations also offer tax relief for individuals and businesses donating to licensed charitable organisations, allowing them to claim the donations as deductions in their tax computations.
Despite the proposals, MPs on the committee voiced concerns over other tax regulations, including the proposed Electronic Tax Invoices (eTims) system, which they criticized for lacking a clear operational framework, especially for small businesses in the informal sector.
KRA Commissioner General Humphrey Wattanga defended the eTims system, stressing that real-time invoicing would help streamline tax collection across all businesses, but the MPs remained unconvinced, threatening to block the proposal if it did not address the challenges faced by informal traders.
