NPOs enjoy tax exemptions and incentives from Government because they provide services that positively influence social welfare.
These services should be provided free of charge, below cost or at the very minimum cost.
The Commissioner is mandated to administer the exemption of Institutions or body of persons or irrevocable Trust of a Public Character. These include: –
- Churches/Religion Organizations
- Schools/Universities etc
These NPOs should also prove to be:
- Established in Kenya; or
- have Regional Headquarters is situated in Kenya; or
- using their Income to benefit of residents of Kenya
Exemptions on Income Tax
For NPOs to be exempt from Income Tax, they must have been established solely to;
- Relief poverty or distress of the Public
- Advance religion or education
Exemptions on VAT
To receive an exemption on VAT, NPOs should make an application through the NGO?s Board to the Cabinet Secretary of Finance.
NPOs get exemptions on VAT after satisfying the below conditions;
- Must be registered under the Societies Act or NGO Act, or exempted from registration by the Registrar of Societies or the NGO Coordination Board.
- Income must be exempt from tax under the Income Tax Act and approved by the Commissioner of Social Services.
- Such services are not treated as taxable supplies, and no VAT is charged on them.