- Advertisement -

Should Churches Pay Tax? New Battle Opens Can of Worms

A ruling in favour of KRA would have opened the floodgates

- Advertisement -

The Kenya Revenue Authority’s failed bid to collect Ksh5.5 million in taxes from Thika Road Baptist Church has sparked a conversation among Kenyans online on the regulation and taxation of churches in the country.

While churches are exempt from paying taxes on tithes, donations and offerings, KRA had argued that they needed to apply for tax exemption certificates in its case against the church. They maintained that the exemption was not automatic.

Justice David Majanja, however, dealt them a blow in his ruling as he upheld the decision of the Tax Appeals Tribunal that it was not necessary for the church to seek a tax exemption certificate.

“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,” Justice Majanja ruled.

The decision came as a relief to churches around the country which collect billions annually in tithes, donations and offerings. A ruling in favour of KRA would have opened the floodgates allowing the taxman to go after churches over regulatory breaches.

READ>>National Bank Finance Director Appointed Managing Director

It would have been considered precedent-setting and would have especially affected mega-churches in the country.

Majanja maintained that KRA failed to demonstrate that tithes, donations and offerings are gains and profits, employment or rights granted for use of property or any other form of recognised income by the Income Tax Act.

In their analysis of the ruling, financial services firm KPMG East Africa wrote: “The decision is a big relief to churches and charitable organizations as it affirms that tithes, offerings and donations are not subject to tax.”

“The decision provides clarity on the tax treatment of income that is not specified as subject to tax under the Income Tax Act. The strict interpretation of what is subject to tax under Section 3 (2) of the Income Tax Act is a relief to taxpayers where tax is demanded outside the scope of the Income Tax Act. Further, the decision clarifies that one is not supposed to apply for a tax exemption certificate when the income is not subject to tax in the first place.”

READ>>Kenya Airways Goes Big On Drones Technology

The ruling sparked mixed reactions from Kenyans. While some supported the ruling maintaining that the pressure from KRA was unjustified, others argued that it was time to rethink the taxation and regulatory status of churches in the country.

Sample some of the comments shared by Kenyans on Twitter:

“Shame on KRA…How do you even start taxing tithe?” posted Kate Morgan.

“What, if KRA can demand taxes from poor mama mbogas, they should also demand taxes from churches! These are businesses!” argued Shayona26.

“Let churches be vetted; some are purely business enterprises that needs to fulfill their tax obligations,” wrote Allan Oduor.

“KRA has no business with church unless the church is doing business,” wrote Linus Njeru.


- Advertisement -
BUSINESS TODAYhttps://businesstoday.co.ke
editor [at] businesstoday.co.ke
- Advertisement -
Must Read
- Advertisement -
Related News
- Advertisement -


Please enter your comment!
Please enter your name here