A move to impose taxes on Kenyan churches has met a deadlock

Local media reported that Justice David Majanja issued the ruling, upholding a previous ruling by a tax appeal tribunal in favour of a Baptist Church in Nairobi which had been asked to pay $47, 000 (KSh5.5 million) in accrued taxes.

“I, therefore, find and hold that since tithes, offering and freewill donations are not income chargeable with income tax, it was not necessary for the church to seek an exemption,” the High Court Justice was quoted to have said.

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Like most African countries, churches in Kenya have typically been exempt from taxation. However, the Kenya Revenue Authority argued recently that the status quo needed to change, so as to enable the government generate more revenue.

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It should be noted that Kenya is among the top 10 African countries that generate the most income through corporate income tax. A previous article by Business Insider Africa showed that the rate of corporate tax in the country is currently at $30, 000.

None of these taxes are imposed on churches. And despite the tax agency's bid to change this, it has failed to substantially prove that church offerings, tithes and donations amount to gains and profits and therefore taxable.

Kenya's Income Tax Act specifically exempts religious bodies and charitable organisations from paying taxes.

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In 2012, Kenya's treasury department began making moves to tax churches, citing the increasing rate at which the churches are venturing into commercial activities such as hospitals, schools, etc. The treasury argued that without taxation, the churches would be competing unfairly with other businesses.

It was on the backdrop of this that the Kenya Revenue Authority had, in 2018, demanded that the Baptist Church must pay up accrued taxes. But the church immediately opposed the demand. It won at the tribunal and now at the High Court.

The latest ruling by Justice David Majanja comes as a major relief for many of the churches and is expected to serve as precedential, going forward.

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