Court Bars KRA From Imposing Taxes on Tithes, Church Offerings

The High Court has Barred the Kenya Revenue Authority (KRA) from imposing taxes on tithes, offerings, and other donations made to churches by believers.

The move follows a case where KRA demanded 5.5 million shillings in tax from Thika Road Baptist Church, accusing the church of noncompliance in producing a document that proved it was exempted from paying taxes.

The taxman insisted that houses of worship must produce a tax exemption certificate despite the fact that these places are exempted from paying taxes.

“I hold that since tithes, freewill donations and offerings are not income chargeable with income tax, the church didn’t have to seek the tax exemption,” justice David Majanja ruled.

Majanja also revealed that KRA did not demonstrate how tithes and offerings are gains and profits, employment or rights granted for use of property, or any other form of recognized income by the Income Tax Act (ITA).

In 2012, the National Treasury had announced that churches would start paying taxes for commercial activities that give them an unfair advantage over other investors arguing that some churches and other charitable organizations were running businesses that have not been declared to the Kenya Revenue Authority for payment of tax.

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More recently, religious institutions have increased their investment in education, healthcare, financial services, hospitality, and real estate to reduce their reliance on tithes and offerings from members.

Despite increased earnings from these businesses, the government maintains that churches should be exempted from paying taxes, mentioning their great contribution to eradicating poverty through their charitable work.  For instance, some schools and hospitals run by churches offer affordable services seeking to benefit the less privileged.

Today churches are among the biggest receivers of money in Kenya. The rise in the number of churches in the country reflects how lucrative the ‘’business’’ is. Some of these institutions have redefined their main objective of spreading the gospel and turned to invest in projects. Church leaders however defend these investments arguing that they provide financial support for their growth.

The catholic church and the Presbyterian Church of East Africa (PCEA) are some of the churches that own a lot of property in the country including schools, hospitals, lands, and multimillion houses. The 10-storey cardinal Otunga Plaza at the heart of Nairobi’s CBD, Waumini House in Westlands, and the Pacis Centre along Waiyaki way are some of the prestigious properties in Nairobi owned by the catholic church.

On the other hand, the PCEA owns Milele mall in Ngong and Milele Beach Hotel in Mombasa which is famous for hosting lavish weddings among other posh events.