Relief for Churches as Court Bars KRA from Imposing Taxes on Tithes and Offerings

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

Justice David Majanja upheld a ruling by the Tax Appeals Tribunal that blocked KRA from demanding taxes from houses of worship. The tribunal made the ruling in a case where the tax agency was demanding Sh5.5 million in tax from Thika Road Baptist Church.

In demanding the said amount from the church, the taxman argued that it failed to produce documents that showed it was exempted from paying taxes.

Although churches, mosques, and other houses of worship are exempted from paying taxes, KRA insisted that they must produce a tax exemption certificate, which is subjected to certain conditions.

But judge Majanja dismissed KRA's argument, stating that donations, tithes, and offerings made to the church cannot be considered an income, hence not subject to the income tax bracket.

"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," Majanja ruled.

The judge also faulted KRA for failing to demonstrate how tithes, offerings, and donations to the churches 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).

He noted that tithes and offerings to the church and other religious organizations are not within the scope of income tax, which is chargeable within the ITA.

"I agree that the type of income (to the church) does not fall within section 3(2) of the ITA," he said.