Tax Planning in Light of the COVID-19 Pandemic, Kenya
Donations
We applaud our legislators and President for passing into law
tax changes that will help provide overall tax relief to taxable
persons in Kenya. There are additional deductions that taxable
persons should also keep in mind when calculating their
income taxes, especially during these COVID-19 pandemic
times. Key in this article are donations.
In order to determine the taxable gains from incomes that are
derived in or accrued in Kenya from
(i)
(ii)
(iii)
any business, for whatever period of time carried on;
(business income)
any employment or services rendered; (employment
income)
any right granted to any other person for use or
occupation of property; (rental income)
the Kenyan Income Tax Act allows persons, individual or
company, resident or non-resident, to deduct
Any cash donation in that year of income to a
charitable organisation.
Expenditure incurred in that year of income on
donations to the Kenya Red Cross, county
governments or any other institution responsible for
the management of national disasters to alleviate the
effects of a national disaster.
Donations to charitable organisations
Conditions for deduction of donations to charitable organisations
1) That the donation is in cash or in cheque.
2) That the donation is made to a charitable organisation
established in Kenya, that is a not-for-profit organisation
of a public character and that has been established for
purposes of the relief of poverty or distress of the public,
or advancement of education.
3) That the charitable organization is registered or exempt
from registration under the Societies Act (Cap. 108) or
the Non-governmental Organisations Coordination Act,
1990 (Act No. 19 of 1990, First Sch.).
May 06, 2020
4) That the charitable organization has a valid tax exemption certificate.
5) That there is a written declaration from the donee that the donation shall be used
exclusively for the objects of charity.
6) That there is a receipt issued and certified by the recipient of the donation as proof of
the donation. The receipt must include the full names and address of the donee, the KRA
PIN of the donee, date of donation, the purpose for which the donation was made and
amount of donation.
This deduction is only available when all the conditions listed above have been met.
Taxpayers that have made such donations and wish to claim a tax deduction should obtain the
required documentation listed above for the deduction to be allowed. Claiming this tax
deduction would in effect afford them a tax saving of about 25% of the amount of donation.
Donations to Kenya Red Cross, county governments or institutions responsible for the
management of national disasters for the alleviation of effects of a national disaster
Conditions for deduction of the donations to alleviate the effects of a national disaster
1) That the President declares the event a national disaster.
2) That there is proof of the donation. This requirement has not been specified, however, a
receipt for the donation would be necessary, as would apply for any other expense.
This deduction is only available when all the conditions listed above have been met.
At the moment, donations to the above entities as regards the COVID-19 Response are not
allowable because the President has not declared COVID-19 as a national disaster.
However, donations that have been made to the Kenya Red Cross would still be allowable as
charitable donations. Kenya Red Cross is a charitable organisation that is a registered society
with a valid tax exemption. In this case, the taxpayer would instead be allowed a deduction
under Section 15(2)(w) of the Income Tax Act discussed above under charitable donations.
Taxpayers that have made donations towards Kenya’s COVID-19 Response to county
governments or institutions responsible for the management of national disasters, currently the
National Disaster Management Unit under the Ministry of Interior and Coordination of National
Government, will pay income tax of about 25% of the amount of donation.
This article has been prepared for general guidance only and does not constitute professional advice. You should not act
upon information contained in this article without obtaining specific professional advice. No representation or warranty is
given as to the accuracy or completeness of the information contained in this article, and to the extent permitted by law,
Gloria Ogaga does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone
else acting, or refraining to act, in reliance on the information contained in this article or on any decision based on it.
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May 06, 2020