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Charity

Tax Benefits of Charitable Giving in Kenya

9 min read
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Easy Access Staff

Introduction

Did you know that donating to charity in Kenya can reduce your tax bill? The Kenya Revenue Authority (KRA) allows individuals and businesses to deduct certain charitable contributions from their taxable income. This means you can support causes you care about while also lowering what you owe in taxes.

However, not all donations qualify for tax benefits, and there are specific rules you must follow. This guide explains how tax deductions for charitable giving work in Kenya, what qualifies, how to claim deductions, and how to maximize both your giving impact and tax savings.

Tax Benefits Overview

The Basic Principle

When you donate to qualifying charities:

  • You can deduct the donation from your taxable income
  • This reduces your overall tax liability
  • You pay less tax while supporting good causes

Example: If your annual income is KES 1,000,000 and you donate KES 50,000 to a qualifying charity:

  • Without donation: Taxable income = KES 1,000,000
  • With donation: Taxable income = KES 950,000
  • You save tax on that KES 50,000

Income Tax Act

  • Section 15(2)(n) allows deductions for donations to approved institutions
  • Donations must be to organizations approved by Commissioner of Domestic Taxes

Value Added Tax Act

  • Some charitable organizations exempt from VAT
  • Tax exemption number provided

What Qualifies for Tax Deductions?

Approved Charitable Organizations

Must Be:

  1. Registered with NGO Coordination Board or relevant authority
  2. Approved by KRA Commissioner for tax-exempt status
  3. Operating exclusively for charitable purposes
  4. Not distributing profits to individuals

Types of Organizations:

  • Public universities and colleges
  • Public hospitals and health facilities
  • Registered charities (NGOs, trusts, foundations)
  • Religious organizations (for specific charitable projects, not general offerings)
  • Cultural and educational institutions
  • Research institutions
  • National or county government projects specifically designated

How to Verify Qualification

Check KRA Approval

Before donating for tax purposes:

Ask the Organization:

  • Do you have KRA tax-exempt status?
  • What’s your PIN number?
  • Can you provide receipt for tax purposes?

Check with KRA:

  • Visit iTax portal
  • Contact KRA taxpayer service centers
  • Call KRA helpline: 020 4 999 999, 0711 099 999

Red Flag: If organization can’t provide KRA approval details, your donation likely won’t be tax-deductible.

Types of Eligible Donations

Cash Donations

  • Money transfers
  • M-Pesa payments
  • Bank transfers
  • Cheques
  • Must have proper documentation

In-Kind Donations (More Complex)

  • Goods or services
  • Must be properly valued
  • Need professional valuation for large amounts
  • Documentation requirements stricter

Not Eligible:

  • Donations to individuals (even if needy)
  • Harambee contributions (unless to approved institution)
  • Political party contributions
  • Business sponsorships (treated differently for tax)
  • General church offerings (only specific approved projects)

How Much Can You Deduct?

For Individuals (PAYE)

Current Rules:

  • You can deduct donations from taxable income
  • No specific cap mentioned in law for charitable donations
  • Must be reasonable and supported by receipts
  • KRA may query unusually large amounts

Practical Considerations:

  • Keep donations proportional to income
  • Document everything properly
  • Ensure organizations are approved

For Businesses (Corporate Tax)

Allowable Deductions:

  • Donations to approved charitable organizations
  • Educational sponsorships to approved institutions
  • Contributions to approved research
  • Support for approved cultural activities

Limits and Rules:

  • Must be wholly and exclusively for business purposes or approved charitable purposes
  • Cannot be disguised profit distribution
  • Must be properly documented
  • Should not be excessive compared to business income

Special Provisions:

  • Donations to public universities: fully deductible
  • Donations to national or county government for specific projects: check approval
  • Sponsorships may be treated differently (marketing expense vs donation)

How to Claim Tax Deductions

For Employed People (PAYE)

Method 1: Through Your Employer

If Regular Monthly Donations:

  1. Inform your HR/payroll department
  2. Provide details of approved charity and KRA approval
  3. Show payment evidence
  4. Employer includes in PAYE computation

Advantages:

  • Automatic monthly deduction
  • Tax benefit immediate
  • Less paperwork for you

Challenges:

  • Not all employers facilitate this
  • Must be regular arrangement

Method 2: Annual Tax Return

If One-Time or Variable Donations:

  1. Keep All Receipts Throughout the Year

    • Official receipts from charity
    • Payment proof (M-Pesa message, bank statement)
    • Organization’s KRA PIN and approval details

  2. File Annual Tax Return

    • Even if employed, you can file
    • iTax portal: www.itax.kra.go.ke
    • Deadline: June 30 for prior year

  3. Claim Deduction

    • Include donations in return
    • Attach supporting documents
    • KRA reviews and processes

  4. Refund or Offset

    • If you overpaid tax, get refund
    • Or offset against future tax liability

For Self-Employed and Businesses

Quarterly/Annual Returns:

  1. Maintain Records

    • All donation receipts
    • Payment evidence
    • Charity KRA approval documents
    • Purpose of donation

  2. Include in Tax Computation

    • Reduce taxable income by donations
    • File quarterly installment tax (if applicable)
    • File annual corporate tax return

  3. Submit Supporting Documents

    • Keep available for KRA audits
    • Upload when required in iTax

Required Documentation

Essential Documents

From Charity:

  1. Official Receipt
    • Organization letterhead
    • Receipt number
    • Date of donation
    • Amount
    • Your name and KRA PIN
    • Purpose (if specific project)
    • Signature and stamp
    • Organization KRA PIN

Example Receipt Format:

[Charity Logo/Letterhead]
PIN: [Organization's KRA PIN]

DONATION RECEIPT No.: [Number]

Date: [Date]
Received from: [Your Name]
Donor PIN: [Your KRA PIN]
Amount: KES [Amount in figures and words]
Payment Method: [M-Pesa/Bank/Cheque]

Purpose: [General support/Specific project]

This donation is tax-deductible. [Organization Name] is approved by KRA for tax-exempt status.

Signature: __________________
Name: [Authorized Signatory]
Position: [Title]
Stamp: [Official Stamp]

Thank you for your generous support!
  1. KRA Approval Letter (Copy)
    • Shows organization is approved
    • May need for first-time claims

Your Payment Evidence:

  • M-Pesa confirmation SMS
  • Bank statement showing transaction
  • Cheque copy
  • Pay-in slip

Keep Together:

  • Organize by year
  • File chronologically
  • Make copies (physical and digital)
  • Keep for at least 5 years (KRA can audit)

For Large Donations

Additional Documentation (Over KES 100,000):

  • Detailed donation agreement
  • Specific project description
  • Expected use of funds
  • Professional valuation (if in-kind)

Maximizing Your Tax Benefits

Strategic Giving

Timing:

  • Make donations before year-end (December 31)
  • Allows claiming in that tax year
  • Plan ahead for maximum benefit

Bundling:

  • Instead of small monthly donations, consider larger annual donation
  • Easier to track and claim
  • More significant tax impact

High-Tax Years:

  • If you have unusually high income year (bonus, sale of property)
  • Larger donation that year gives bigger tax saving
  • Reduces tax on high income

Choosing Where to Give

Approved Organizations:

  • Verify KRA approval before donating
  • Ask for confirmation
  • Don’t rely on promises - check yourself

Strategic Priorities:

  • Support causes you care about
  • Ensure legitimate impact
  • Tax benefit is bonus, not primary reason
  • Choose effective organizations

Documentation Discipline

Throughout the Year:

  • Request receipt immediately for every donation
  • Verify receipt has all required information
  • File systematically
  • Don’t wait until tax time

Digital Copies:

  • Scan or photo all receipts
  • Back up digitally
  • M-Pesa messages automatically saved
  • Email receipts to yourself

Common Mistakes to Avoid

1. Donating to Non-Approved Organizations

Problem:

  • No tax deduction if organization not KRA-approved
  • Money still helps, but no tax benefit

Solution:

  • Always verify approval first
  • Ask organization directly
  • Check KRA records

2. No Proper Documentation

Problem:

  • Can’t claim without receipts
  • Verbal confirmations don’t count
  • Incomplete receipts rejected

Solution:

  • Insist on proper receipt
  • Don’t accept informal acknowledgments
  • Verify receipt has all details

3. Claiming Personal Payments as Donations

Problem:

  • Payment for services (school fees, medical bills) not donations
  • Even if to approved institution
  • KRA will reject

Solution:

  • Understand difference between fee and donation
  • Only claim actual donations
  • No quid pro quo (getting something back)

4. Inflating Donation Amounts

Problem:

  • Illegal and fraud
  • KRA can verify with organization
  • Penalties and prosecution possible

Solution:

  • Only claim actual amounts
  • Keep honest records
  • Risk not worth it

5. Losing Documentation

Problem:

  • Can’t claim without proof
  • KRA requires documentation
  • Memory not enough

Solution:

  • File immediately
  • Multiple copies
  • Digital backup

6. Not Following Up

Problem:

  • File claim but don’t check status
  • Miss KRA queries
  • Lose out on refund

Solution:

  • Monitor iTax account
  • Respond to KRA promptly
  • Follow up on refunds

Special Situations

Donations Through Employer Programs

Some companies have matched giving or payroll giving:

Matched Giving:

  • You donate, company matches
  • Both amounts may be tax-deductible
  • Company claims their portion
  • You claim yours
  • Great way to double impact

Payroll Giving:

  • Regular deduction from salary
  • Employer handles tax benefit
  • Convenient and automatic
  • Check if employer offers

Family Donations

Joint Filing:

  • Married couples: either spouse can claim
  • Put donations in name of person with higher income
  • Bigger tax benefit
  • Ensure receipt in claimant’s name

Teaching Children:

  • Involve children in charitable giving
  • Good values education
  • But claim under parent’s tax

Wills and Estates

Bequests to Charity:

  • Leaving assets to charity in will
  • May reduce estate tax liability
  • Consult tax advisor
  • Ensure charity can accept

Business CSR Programs

Corporate Giving:

  • CSR donations usually tax-deductible for business
  • Must follow corporate tax rules
  • Proper governance and documentation
  • May have different limits

Filing Tax Returns with Charitable Deductions

Step-by-Step Process

Using iTax Portal:

  1. Login

  2. Select Returns

    • Choose correct return type (Individual/Corporate)
    • Select tax period (year)

  3. Enter Income Details

    • Employment income
    • Business income
    • Other income

  4. Enter Deductions

    • Look for “Allowable Deductions” section
    • Include charitable donations
    • Enter total amount

  5. Attach Documents

    • Upload scanned receipts
    • Organization approval documents
    • Payment proofs

  6. Submit

    • Review all information
    • Submit return
    • Save acknowledgment

  7. Follow Up

    • Check for KRA queries
    • Respond promptly
    • Monitor refund status

If You Need Help

Tax Agents:

  • Hire registered tax agent
  • They file on your behalf
  • Cost: KES 5,000-20,000 depending on complexity
  • Worth it for complex situations

KRA Assistance:

  • Visit Huduma Centre or KRA office
  • Tax education centers
  • Helpline: 020 4 999 999

Impact of Tax-Efficient Giving

For Donors

Financial:

  • Reduce tax burden
  • Give more at less cost
  • Smart financial planning

Personal:

  • Support causes you care about
  • Feel good about giving
  • Make real difference

For Charities

Increased Donations:

  • Tax incentive encourages giving
  • Donors can give more
  • More resources for programs

Sustainability:

  • Regular, reliable support
  • Can plan better
  • Long-term partnerships with donors

For Society

More Resources for:

  • Education
  • Healthcare
  • Poverty alleviation
  • Environmental conservation
  • Community development

Shared Responsibility:

  • Private sector contributing
  • Complements government efforts
  • Civil society strengthened

Future of Charitable Giving Tax Benefits

Potential Changes

Kenya considering:

  • Clearer guidelines on limits
  • Simplified verification process
  • Digital tracking of donations
  • Automatic approval for certain organization types

International Best Practices

Other countries have:

  • Higher deduction limits
  • Carry-forward provisions (use deduction over multiple years)
  • Immediate tax credits (not just deductions)
  • Donor-advised funds

Kenya may adopt some of these to encourage more giving.

Conclusion

Tax benefits for charitable giving in Kenya provide a win-win situation: you support causes you care about while reducing your tax liability. However, to benefit, you must donate to KRA-approved organizations, maintain proper documentation, and correctly claim deductions when filing tax returns.

The key steps are:

  1. Verify organization has KRA approval before donating
  2. Get proper receipts with all required information
  3. Keep organized records throughout the year
  4. Claim deductions when filing annual tax returns
  5. Follow up and respond to any KRA queries

Remember, tax benefits are a bonus for doing good, not the primary reason to give. Choose organizations making real impact, ensure your donations are used effectively, and maintain the highest standards of honesty in claiming deductions.

By understanding and using these tax provisions wisely, you can increase your charitable impact while managing your taxes efficiently. As Kenya’s philanthropic culture grows, these tax incentives play an important role in mobilizing private resources for public good, benefiting both individual donors and the communities served by charitable organizations.