Donation Agreement (Kenya)

A Donation Agreement in Kenya records the voluntary transfer of property as a gift, made without payment from the recipient.

The Public Benefit Organisations Act No. 18 of 2013 (PBO Act) is the primary statute governing registered charities and NGOs in Kenya that receive donations. The PBO Act, administered by the Public Benefit Organisations Regulatory Authority (PBORA), requires PBOs to maintain audited accounts of all donations received and to report to PBORA annually. A formal Donation Agreement enables PBOs and NGOs to demonstrate proper governance and compliance with the PBO Act — particularly where donations exceed the reporting thresholds under the NGO Coordination Act No. 19 of 1990, administered by the NGO Coordination Board.

The Income Tax Act (Cap. 470), administered by the Kenya Revenue Authority (KRA), provides specific tax treatment for donations made to certain registered organisations. Donations to registered charitable organisations approved by the KRA under Section 13 of the Income Tax Act are deductible expenses for corporate donors up to specified limits. The KRA issues formal approval letters to qualifying charities, and a Donation Agreement referencing the charity's KRA exemption number supports the donor's tax deduction claim. Donations to non-approved organisations are not tax-deductible, and the KRA may treat large unexplained cash flows as income.

Property donations — including gifts of land registered under the Land Registration Act No. 3 of 2012, vehicles, and business assets — require specific transfer instruments in addition to the Donation Agreement itself. A gift of land must be completed by a formal transfer instrument registered at the relevant Land Registry administered by the National Land Commission (NLC), and stamp duty under the Stamp Duty Act (Cap. 480) is payable unless a specific exemption applies. The Stamp Duty Act exempts certain transfers to registered charitable organisations from stamp duty.

A Donation Agreement should be distinguished from a Grant Agreement — a grant is typically conditional on the recipient achieving specified outcomes and may involve reporting obligations, clawback provisions, and budget restrictions, whereas an unconditional Donation Agreement transfers assets without ongoing performance obligations. Where a corporate donor wishes to impose spending restrictions or require impact reports, the document is more accurately characterised as a Grant Agreement under Kenya law. The forms-legal.com Donation Agreement template also differs from a Charitable Trust Deed, which creates a permanent legal structure for holding donated assets, rather than recording a one-time donation transaction.

A Donation Agreement is needed whenever a donor in Kenya transfers money, property, or assets to a recipient on a formal basis and wishes to record the terms of that transfer in a legally enforceable document.

A Donation Agreement is required when a corporate entity registered with the Business Registration Service (BRS) makes a charitable donation to a Kenya Revenue Authority (KRA)-approved organisation and wishes to claim the donation as a tax-deductible expense under Section 13 of the Income Tax Act (Cap. 470). The KRA may require a written Donation Agreement to verify the nature, amount, and recipient of the donation during a tax audit.

A Donation Agreement is needed when a foreign donor — including a development organisation, a bilateral aid agency, or a diaspora individual — transfers funds to a Kenya NGO or PBO. The NGO Coordination Board requires NGOs to report foreign donations above prescribed thresholds under the NGO Coordination Act No. 19 of 1990, and a written Donation Agreement provides the documentary evidence required for the NGO's registration and annual reporting.

A Donation Agreement is required when a donor wishes to attach conditions to the use of donated funds — for example, restricting the donation to a specific project, a particular county, or a defined beneficiary group. Conditional donations must be recorded in writing to create enforceable obligations on the recipient under the Law of Contract Act (Cap. 23).

A Donation Agreement is needed when an individual donates real property registered under the Land Registration Act No. 3 of 2012 to a registered charity, school, religious institution, or community group. The Donation Agreement forms the basis for the transfer instrument lodged with the Land Registry, and the agreed value of the donated property determines stamp duty liability under the Stamp Duty Act (Cap. 480).

A Donation Agreement is needed when a public benefit organisation registered under the Public Benefit Organisations Act No. 18 of 2013 receives a significant donation from a named donor who wishes to establish naming rights, recognition conditions, or endowment terms. The PBORA expects PBOs to maintain donor records consistent with their constitutional objects and annual reports to the Authority.

A valid Donation Agreement in Kenya under the Law of Contract Act (Cap. 23) and the Public Benefit Organisations Act No. 18 of 2013 must contain the following essential elements to create enforceable rights and meet regulatory requirements.

Parties and Their Legal Status: Full legal names and addresses of the donor and recipient, the donor's National Identity Card (NIC) number or company registration number from the Business Registration Service (BRS), and the recipient's registration details — PBO registration number under the Public Benefit Organisations Act No. 18 of 2013, NGO registration number under the NGO Coordination Act No. 19 of 1990, or company registration number as applicable. The legal status of the recipient determines the tax treatment of the donation and the reporting obligations that apply.

Description of the Donation: A precise description of the donation — the exact monetary amount in Kenya Shillings (KES) or foreign currency (with conversion rate), or a description of the property, goods, equipment, or other assets being donated, including serial numbers, title numbers, vehicle registration plates, or other identifying information. For property donations, the agreed market value should be stated to support stamp duty assessment under the Stamp Duty Act (Cap. 480).

Conditions and Restrictions on Use: A clear statement of whether the donation is unconditional (the recipient may use it at their discretion within their constitutional objects) or conditional (restricted to a specific programme, geographic area, project, or beneficiary category). Conditional donations must specify the conditions precisely, the reporting obligations imposed on the recipient, and the consequences of non-compliance including clawback rights under the Law of Contract Act (Cap. 23).

KRA Tax Status and Exemption Reference: Where the recipient holds a KRA tax exemption certificate under Section 13 of the Income Tax Act (Cap. 470), the certificate number and expiry date should be recorded. The donor should retain a copy of the KRA exemption certificate to support any tax deduction claim. Where the recipient is not KRA-approved, the agreement should acknowledge that the donation is not tax-deductible for the donor.

Transfer Mechanism and Payment Schedule: The date and method of the donation transfer — bank transfer to the recipient's Kenya-resident bank account, M-PESA Paybill number, transfer of title documents for property, or physical delivery of goods. For large donations paid in instalments, the payment schedule should specify each instalment amount, due date, and the conditions (if any) that must be met before each payment is released.

Acknowledgment and Receipt: The recipient's obligation to issue a formal acknowledgment of receipt — in the format required by the KRA for tax deduction purposes — within a specified period after the donation is received. Public benefit organisations registered under the PBO Act are required to issue donation receipts and record each donation in their audited accounts submitted to the Public Benefit Organisations Regulatory Authority (PBORA).

Reporting and Accountability: For conditional donations, the recipient's obligation to submit progress reports, financial statements, or impact reports to the donor at agreed intervals. The National Cohesion and Integration Commission (NCIC) imposes additional reporting requirements on donations related to electoral or civic activities under the Elections Act No. 24 of 2011.

Governing Law and Dispute Resolution: The agreement shall be governed by the laws of Kenya, and disputes shall be referred to the High Court of Kenya or the Nairobi Centre for International Arbitration (NCIA) under the Nairobi Centre for International Arbitration Act No. 26 of 2013. The forms-legal.com Donation Agreement template includes all eight elements and a receipt schedule formatted for KRA audit purposes.