Legal Considerations for Global Health NGOs and Donor-Funded Programmes Operating in Kenya

Global health NGOs and donor-funded programmes operating in Kenya are working under a legal framework that changed substantially in 2024, and the transition windows that came with that change have now closed. Any organisation still treating the Public Benefit Organisations Act as a future reform, or its own tax exemption certificate as permanently settled, is working from an outdated picture of its own compliance position.

The PBO Act Is Now the Operative Framework

The Public Benefit Organisations Act, 2013 was assented to over a decade before it actually took effect. It finally commenced on 14 May 2024, under Legal Notice No. 78 of 2024, and it repealed the NGO Co-ordination Act, 1990 that had governed the sector until then. Existing NGOs were given twelve months from commencement to apply for fresh registration as public benefit organisations in order to retain their legal status, meaning that window closed around 14 May 2025. An organisation that has not re-registered by now is operating on borrowed time under its old NGO Co-ordination Act status, and should treat this as an urgent, not routine, item.

Registered PBO status is also the gateway to a set of benefits the Act reserves specifically for organisations that hold it, including income tax exemption, preferential VAT and customs duty treatment, stamp duty and court fee exemptions, and incentives for donations directed toward endowment formation. These are not automatic simply because an organisation does good work; they attach to the PBO registration itself.

Tax Exemption Runs on a Separate, Parallel Track

PBO registration is not the same approval as income tax exemption, and donor-funded health programmes need to secure both rather than assuming one covers the other. The general income tax exemption for charitable organisations sits under the Income Tax Act’s First Schedule and is granted by the Commissioner on application, valid for five years and renewable, provided the organisation is organised and operated solely for a charitable purpose directed at public benefit rather than, for instance, a narrow group defined by family connection.

This exemption regime was itself overhauled through the Income Tax (Charitable Organisations and Donations Exemption) Rules, 2024, made under Legal Notice No. 105 of 2024, which the Kenya Revenue Authority confirms came into force on 18 June 2024. The Rules tighten what qualifies: an organisation cannot retain more than an average of 15% of its funds over three consecutive years without directing them to its charitable purpose, donations counted toward exemption must be non-refundable cash that gives the donor no benefit in return, and documentation and substantiation requirements for both the exemption itself and any donation deductions have been tightened.

A Second Closed Transition Window

Organisations that already held a tax exemption certificate before the 2024 Rules took effect were not grandfathered in indefinitely. KRA gave existing certificate holders a one-year transition period, ending 18 June 2025, to demonstrate compliance with the new Rules, and has been explicit that failure to do so by that date may result in revocation of the exemption. That deadline has also now passed. For a donor-funded health programme, this means the practical question is no longer “when do we need to comply” but “can we currently evidence compliance,” since KRA’s stated position is that any prior guidance inconsistent with the 2024 Rules is invalid to the extent of that inconsistency.

What This Means in Practice for Donor-Funded Health Programmes

A global health NGO running donor-funded programmes in Kenya is now, in effect, managing two live compliance obligations rather than one: PBO registration under the 2013 Act as it finally exists in force, and income tax exemption under the tightened 2024 Rules, each with its own now-closed transition window behind it. The fund-retention limit in the 2024 Rules is worth particular attention for programmes that carry forward unspent donor funds across financial years for legitimate operational reasons, since the 15% average retention ceiling is measured over three years rather than any single year, and a programme that has not tracked this deliberately may already be out of step with it without having done anything it would recognise as wrong.

Organisations should also not assume PBO registration and tax exemption certification move in lockstep procedurally; they are applied for separately, to different bodies, and an organisation can in principle be validly registered as a PBO while its tax exemption position is unresolved, or vice versa during a transition. Treating them as one project with two distinct filings, rather than a single combined compliance exercise, is the more accurate way to plan the work.