The Income Tax (Charitable Organisations and Donations Exemption) Rules, 2024 (the 2024 Rules) were gazetted vide Legal Notice No. 105 of 2024 on 18 June 2024 (the Effective Date) by the Cabinet Secretary for the National Treasury and Economic Planning. The 2024 Rules repeal the Income Tax (Charitable Donations) Regulations, 2007 (the Repealed Rules).
The key new provisions of the 2024 Rules include:
- new rules on donations that require donations to be paid out of the taxable income of the donor, provided that;
- the donation should not result in a taxable loss; and
- not more than fifty per cent (50%) of the donations in any year of income should be to unrelated entities.
- detailed provisions requiring KRA to notify a charitable organisation before revoking an income tax exemption certificate and providing thirty (30) days, from the date of the notice of intention by the KRA, for the taxpayer to respond;
- charitable organisations exempted from income tax under the Repealed Rules have a transitional period of twelve (12) months from the Effective Date to comply with obligations introduced under the 2024 Rules. The obligations introduced under the 2024 Rules include:
- an exempt charitable organisation should not retain more than an average of fifteen per cent (15%) of its surplus funds in a period of three (3) succeeding years without using the surplus funds for its charitable purposes;
- an exempt charitable organisation should not distribute its income directly or indirectly to any person except as reasonable remuneration for services rendered; and
- an exempt charitable organisation should obtain a separate tax personal identification number (PIN) for any unrelated business, that is any business by way of trade regularly carried on by the exempt charitable organisation that is not carried out to support the exempt charitable activities.
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