Taxation for Not-For-Profit Organisations

What Incentives do Not-For-Profit Organisations get?

Tax Exemptions

NPOs enjoy tax exemptions and incentives from Government because they provide services that positively influence social welfare.

These services should be provided free of charge, below cost or at the very minimum cost.

The Commissioner is mandated to administer the exemption of Institutions or body of persons or irrevocable Trust of a Public Character. These include: -

  • Charities/NGOs/Trusts
  • Churches/Religion Organizations
  • Hospitals
  • Schools/Universities etc

These NPOs should also prove to be:

  • Established in Kenya; or

  • have Regional Headquarters is situated in Kenya; or

  • using their Income to benefit of residents of Kenya

Exemptions on Income Tax

For NPOs to be exempt from Income Tax, they must have been established solely to;

  • Relief poverty or distress of the Public
  • Advance religion or education

Exemptions on VAT

To receive an exemption on VAT, NPOs should make an application through the NGO?s Board to the Cabinet Secretary of Finance.

NPOs get exemptions on VAT after satisfying the below conditions;

  • Must be registered under the Societies Act or NGO Act, or exempted from registration by the Registrar of Societies or the NGO Coordination Board.
  • Income must be exempt from tax under the Income Tax Act and approved by the Commissioner of Social Services.
  • Such services are not treated as taxable supplies, and no VAT is charged on them.

Exemptions on Customs Duty

To get an exemption on Customs Duty, NPOs must apply to the Cabinet Secretary for National Treasury through the NGO Board.

Goods that are exempt from Customs Duty include;

  • Gifts or Goods donated or purchased for donation to a non-profit organization or government-approved institution for: their official use; free distribution to the poor and needy; use in medical treatment, education, religious, or rehabilitation work; or other purposes approved by the government.

  • Certain goods, including some passenger motor vehicles, and office, audio and visual electronic equipment, are excluded from the custom duties exemptions.

  • Textiles, new and used clothing, footwear, and certain foods also are excluded from the customs duties exemption; unless donated or purchased for donation to registered homes for poor and needy persons.