NCBA has successfully hosted its annual engagement luncheon with faith-based institutions, aimed at addressing the new tax compliance regulations for charitable organizations. Themed “Navigating Tax Reforms for Sustainability,” the event provided a platform for insightful discussions on the recent changes to tax laws affecting charitable organizations in Kenya.
The focus of the luncheon was on the Income Tax (Charitable Organizations and Donations Exemption) Rules, which were gazetted on June 18, 2024, under Legal Notice No. 105 of 2024. These reforms, introduced by the Cabinet Secretary for National Treasury and Economic Planning, have replaced the 2007 regulations on charitable donations. The updated rules have caused challenges for many charitable institutions trying to comply with the new framework.
Mr. Tirus Mwithiga, NCBA's Group Director of Corporate Banking and Investment Advisory, underscored the importance of faith-based institutions in social development, education, and humanitarian efforts. “We recognize the vital role that faith-based institutions play in advancing societal welfare. Our role is not only to provide financial services but also to nurture long-term partnerships that foster positive societal impact,” said Mr. Mwithiga. He emphasized NCBA’s commitment to providing capacity-building and advisory services to help these organizations navigate the complexities of the new tax regulations.
One of the major changes introduced by the new tax rules is the cap on charitable donation deductions, set at 50% of the total income, provided the deduction does not result in a taxable loss. Additionally, business income is exempt if used solely for charitable purposes. Charities must also submit proof of donations, detailed budgets, and exemption certificates. Under the new regulations, organizations can accumulate surplus funds up to 15% of total funds over three years.
Ms. Margaret Karanja, Chief Manager of the Exemption, Policy, and Tax Advisory Division at the Kenya Revenue Authority (KRA), highlighted the challenges faith-based institutions face, particularly around poor documentation and the unclear interpretation of the new rules. With a deadline for compliance looming in June 2025, Ms. Karanja urged institutions to ensure they meet all documentation requirements. She also pointed out that KRA has automated the application process for income tax exemption certificates to streamline the compliance process.
In his remarks, the Apostolic Nuncio to Kenya and Sudan, H.E. Most Reverend Herbert van Megen, offered a moral perspective on tax payment, referencing the words of Saint John Paul II. He emphasized that paying taxes is not only a legal obligation but also an act of solidarity that supports the common good. “Taxes should contribute to the welfare of those in need,” he stated.
The event brought together expert panelists from KRA, Grant Thornton, and the Kenya Conference of Catholic Bishops, providing attendees with a comprehensive understanding of the new regulations. NCBA’s commitment to supporting faith-based institutions was evident, with practical training focused on maintaining the charitable purpose of income and ensuring compliance with tax exemption applications.
NCBA’s dedication to fostering transparent financial reporting and providing practical support for tax compliance aims to help faith-based institutions continue their vital services without disruption. The bank’s forums like this one also serve to strengthen relationships with its clients and ensure their financial sustainability.
Looking ahead, NCBA remains focused on helping these organizations navigate evolving tax landscapes while ensuring their long-term impact on society.
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