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Kenya: The High Court upholds that tithes, offerings, and donations to churches and not-for-profit organizations are not subject to tax

21 June 2022
– 3 Minute Read


In a Judgement delivered by the High Court on 31st May 2022 in the case of Commissioner of Domestic Taxes vs Thika Road Baptist Church Ministries (HCCOMMITA/E024/2021) (being an appeal by the Commissioner against the decision of the Tax Appeals Tribunal), the Court determined the question of whether the income of the Respondent (a religious organization registered under section 10 of the Societies Act – Cap 108 Laws of Kenya) consisting of offerings, tithes and donations is subject to tax. 

The matter stemmed from an audit of the books of account of the Church for the years of income 2015 to 2017 where the KRA assessed tax of KES. 6,678,386 on the surplus amounts reported in the books of the Church. The Church objected to and appealed against the assessment to the Tax Appeals Tribunal (TAT) on the basis that its income arising from offerings and tithes was exempted from tax under paragraph 10 of the First Schedule to the Income Tax Act (Cap 470 Laws of Kenya) (the ITA). Further, the Church stated that any surplus realized in a given year would be rolled over to the following year and used for the benefit of the church members and the same would not be distributed to anyone in whatever form. On the other hand, the KRA stated that the exemption under Paragraph 10 of the First Schedule is not automatic and would only be granted upon application, approval, and issuance of an exemption certificate by the Commissioner as outlined thereunder. The KRA further stated that the burden of proof lied on the Church to prove the existence of such an exemption.

In arriving at its decision, the Tribunal held that while the exemption under paragraph 10 of the first schedule is not automatic, the first question should be whether the income is taxable under section 3(2) as read together with section 15(7) of the ITA, which provides for income that is subject to tax in Kenya and the specific sources of taxable income respectively. The Tribunal held that income from tithes and offerings does not fall under the ambit of taxable income pursuant to the said sections and is therefore not subject to tax, and that the Church does not require an express exemption for the income to be treated as such.

In upholding the Tribunal’s decision, the High Court held that the income of the Church arising from tithes, offerings, and donations does not fall within the meaning of taxable income per section 3(2) of the ITA and, as such, is not subject to tax. Further, the Court held that it is only income that is chargeable to tax in the first instance that may be exempt from tax under Section 13 as read together with the first schedule of the ITA.


The implication of this Judgment is that the income of not-for-profit organizations which does not fall within the ambit of taxable income and specific sources of taxable income per the provisions of section 3(2) and 15(7)(e) is not subject to tax in Kenya, and such organizations are not required to apply for and obtain specific exemption from the Commissioner in order for the income to be tax exempt. Such income would include grants, donations, tithes, offerings and any other income of a similar nature.