When Income Exemptions Don't Cover Property Investments

Recently, the Tax Appeals Tribunal in Kenya ruled on a case involving an employee of the World Health Organization (WHO), who had filed an appeal challenging a tax assessment on income used to construct a residential property.

He argued that as a WHO employee, his income was fully tax-exempt under international treaties and agreements Kenya has ratified—including the Vienna Convention, UN General Assembly Resolution 76(I), and other provisions domesticated under Kenyan law.

NGO Staff and Tax Exemptions in Kenya

Generally, employees of international organizations and NGOs may enjoy income tax exemptions—but these are often strictly tied to their official emoluments. And the income is used strictly for official or personal sustenance—not capital projects.

The exemption usually applies to:

• Salaries and allowances earned for services rendered in their official capacity,
• And not automatically to what is done with that income afterward.

So, Why Was the Property Not Exempt?

While the employee may have earned tax-exempt income, the Tribunal found that the funds used to construct the property in Kenya were not protected under the same tax exemption laws. Here's why:

• The income had changed character—from salary to capital used for property investment.
• No sufficient evidence was provided showing that the specific funds used were exempt at the point of use.
• Ownership and use of the property were deemed personal investments, not directly connected to WHO's mission or his official duties.

The Key Takeaway

Tax exemptions for NGO or UN staff apply to income earned, not necessarily to how that income is spent or invested—especially in areas like real estate, which is taxable under domestic law.

Before assuming tax exemption status, even when working with international bodies, it's important to:

• Understand the scope of the exemption,
• Maintain clear documentation, and
• Consult with tax professionals to avoid unexpected assessments.