Did you know? Not all not for profit organisations are treated as charitable organisations for income tax purposes

April 18, 2024

Benefits of obtaining charitable status

Where the Commissioner General of the TRA grants charitable status:

• a deduction is allowed for amounts spent in pursuit of the organisation's functions (together with any other allowable deductions under the law);
• 25% of the organisation's income from its charitable business is deductible prior to deduction of the amounts in pursuit of its functions and any investment i.e. in the case where 75% of its income is used for charitable purposes, then the organisation's income is exempted from tax;
• where an organisation wishes to save funds for a charitable project, it may apply for approval of the Commissioner General for the funds to be deductible for tax purposes during the year of income;
• disposal of investment assets is exempt from capital gain tax, provided that the gain is used for reinvestment in a new investment asset;
• donors are allowed deductions (subject to limitation under the law) of amounts contributed to the organisations with a charitable status.

Who can procure the charitable status?

In terms of the Income Tax Act, 2004, an entity is eligible to obtain charitable status if:

• it is a resident entity of a public character;
• it is solely established for provision of public service i.e. relief of poverty, advancement of education and provision of general public health, education, water or road construction or maintenance; and
• the entity has been issued with a ruling by the Commissioner General stating that it is a charitable or religious organisation.

How can one procure charitable status?

Charitable status can be procured by applying for a tax ruling/decision from the Commissioner General of the TRA specifying that such an organisation is a charitable organisation. The application is carried out by filing Form ITX 902.01E in which the applicant should demonstrate how it has met the requirements for receiving charitable status.

If you would like to learn more on this, or require assistance in obtaining charitable status, please feel free to get in touch with the Dentons EALC East African Law Chambers tax team and we will be pleased to assist further.