Members of Parliament have backed the new tax regulations aimed at churches, NGOs, and other tax-exempt institutions.
The National Assembly Committee on Delegated Legislation, chaired by Ainabkoi MP Samuel Chepkonga, approved the Income Tax Regulations Bill 2024 during a meeting with Kenya Revenue Authority (KRA) officials.
Proposed by former Treasury CS Prof. Njuguna Ndung’u, the bill establishes guidelines for charitable institutions to qualify for tax exemptions and clarifies which donations are eligible for deductions.
The Income Tax Act (Charitable Organisations and Donations Exemptions) Rules 2024 were published on June 18, 2024, replacing the 2007 regulations.
The rules outline the requirements to be met by a charitable organisation to qualify for a tax exemption on their income and to outline how donations to these organisations can be considered for tax deductions.
Currently the regulations provide for exemptions on organisation and institutions that take part in religion, education and eradication of poverty.
KRA Commissioner General Humphrey Wattanga emphasized the need for tighter regulations, citing concerns over some organizations profiting from non-charitable ventures.
“Many tax-exempt organizations are engaging in businesses which are unrelated to charitable purposes for which they are established to undertake without ploughing back such gains to the main objectives of the organization,” Wattanga noted.
KRA Deputy Commissioner Maurice Oray in his submissions to the National Assembly Committee on Delegated Legislation said that while the laws provide tax exemptions to these organisations, there is a need to regulate their activities.
“There is need to ensure that their activities are regulated in as much as they are provided for in the Act,” said Oray.
The Tax Procedures (Electronic Tax Invoices) Regulations 2024, indicates that all businesses will be required to process the real time invoice, which the MPs pointed out that it cannot be applied among a majority of small informal businesses.