PBO Act 2013: How It Affects NGOs in Kenya

What is the Public Benefits Organizations Act, 2013 and How Does It Affect NGOs in Kenya?

May 30, 2025

The Public Benefits Organizations Act, 2013 (commonly referred to as the PBO Act) officially commenced on 14th May 2024.

This landmark legislation introduces a comprehensive legal framework for Public Benefit Organizations (PBOs) in Kenya, replacing the outdated NGO Coordination Act of 1990.

The PBO Act is essentially a guidebook for NGOs and other non-profit entities operating in Kenya. It provides clarity, consistency, and structure for operations, registration, governance, financial transparency, and compliance.

In this article, we examine in depth the provisions of the PBO Act, its impact on existing NGOs, tax exemptions under the Act, and what recent developments mean for non-profit organizations in Kenya.

What is the Public Benefits Organizations Act, 2013?

The PBO Act 2013 is a regulatory law that governs the registration, operation, and accountability of non-profit organizations in Kenya.

Although enacted in 2013, it was not operationalized until May 14, 2024, through a gazette notice by the Cabinet Secretary for Interior.

The Act seeks to promote transparency, accountability, and standardized governance in the non-profit sector.

It replaces the NGO Coordination Act of 1990, marking a significant shift in how NGOs and PBOs are managed and regulated.

Who Does the PBO Act Apply To?

The PBO Act covers:

All NGOs previously registered under the repealed NGO Coordination Act.
Any new organization seeking to operate as a Public Benefit Organization in Kenya.

The PBO Act excludes:

Political parties
Trade unions and employer associations
Religious institutions solely focused on worship
Profit-driven organizations
Foreign NGOs without local offices or Kenyan citizen board representation

To qualify as a PBO, an international NGO must have a physical office in Kenya and ensure that at least one-third of its board members are Kenyan citizens residing locally.

Major Provisions of the PBO Act

1. Mandatory Re-Registration

All NGOs must re-register under the PBO Act within a 12-month transition period (ending May 13, 2026).
Failure to comply will result in the loss of legal recognition as a PBO.

2. Financial Transparency

PBOs are now required to disclose their funding sources and expenditures before period ending May 13, 2026
This requirement applies to all PBOs, regardless of funding size.

3. Standardized Financial Reporting

All financial statements must be prepared using Generally Accepted Accounting Principles (GAAPs) for non-profits.
The deadline for filing Form 14 has been extended from 3 to 6 months after the financial year-end.

4. Tax Compliance

The Income Tax (Charitable Organizations and Donations Exemption) Rules, 2024 introduce new conditions for obtaining and retaining tax-exempt status.

5. Governance Requirements

International PBOs must:

Maintain a physical office in Kenya
Appoint at least one-third of its directors as Kenyan Citizens

Key Features of the PBO Act

Feature	Description
Scope	Applies to entities conducting Public Benefit Activities (e.g., education, health, human rights)
Registration	Mandatory re-registration under the PBO Act by May 13, 2025
Regulator	Establishes the Public Benefit Organizations Authority for oversight
Financial Accountability	All PBOs are mandated to disclose their sources of funding and expenditure reports as well as file annual returns(This must be compiled by May 13, 2026)
Voluntary Self-Regulation	In order to ensure peer governance, the PBO Act encourages PBOs to form self-regulating bodies or networks
Tax Exemptions	Provides access to tax exemptions under the Income Tax Act upon compliance

Tax Exemptions under the PBO Act

Under the PBO Act and the accompanying 2024 Tax Exemption Rules, compliant PBOs may access the following tax benefits:

1. Income Tax Exemption

For a PBO to qualify for income tax exemption:

Income must be used for charitable purposes within Kenya

Income tax exemption is not applicable to business income unless:

The business supports the charitable mission
The work is done primarily by beneficiaries
Income includes rental earnings linked to the charity

2. Investment Income Exemption

Applies to dividends, interest, and asset gains used for charitable purposes

3. Stamp Duty and Court Fees Exemption

Registered PBOs are exempt from paying stamp duty and court fees

4. VAT and Customs Duty Relief

Certain goods/services imported by PBOs may receive preferential tax treatment

5. Donor Tax Deductions

Donations to approved PBOs are tax-deductible if:

The donation doesn’t create a taxable loss for the donor
Not more than 50% of donations go to unrelated third parties
Donation receipts and use are well-documented

To Qualify, a PBO Must:

Prove a public benefit purpose
Submit audited annual returns
Be established solely for charitable purposes
Include asset transfer clauses upon dissolution

When Can KRA Revoke Tax-Exempt Status?

The Kenya Revenue Authority (KRA) may revoke a PBO’s tax exemption if:

Income is used for non-charitable purposes
The PBO fails to submit reports or maintain compliance
The organization provides private benefits or insider favors

FAQs on the PBO Act

1. What is the PBO Act?

The Public Benefits Organizations Act (PBO Act) is a legislation that governs non-profit organizations in Kenya which provide public benefit activities.
It’s aimed at increasing transparency, streamlining registration and providing a framework for regulation, governance and tax incentives.

2. Who qualifies as a PBO?

Any organization conducting non-profit, voluntary public benefit activities.
Any organization that carries out non-profit, voluntary activities aimed at promoting public goods e.g. education, health, poverty alleviation, environmental protection and human rights.

3. When did the PBO Act become operational?

The PBO Act was passed in 2013 but only became operationalised on May 14, 2024 through a gazette notice by the Cabinet Secretary for Interior.

4. Are existing NGOs automatically PBOs?

NO. NGOs registered under the old NGO Coordination Act must re-register under the new PBO Act to retain legal status within 12 months (By May 13, 2025)

5. What are PBO reporting requirements?

PBOs must render:

Their annual financial reports
Funding Sources and expenditures disclosures
Activity impact statements

Failure to submit may result in de-registration or suspension

6. Are PBOs eligible for tax exemptions?

YES but only if the PBO is cleared and approved by the Kenya Revenue Authority (KRA) under the Income Tax (Charitable Organizations and Donations) Exemption Rules 2024.

7. Can foreign organizations register as PBOs?

YES, but they must:

Establish a physical presence in Kenya
Ensure that at least one third of their board members are Kenyan Citizens living in Kenya.

8. Who regulates PBOs?

PBOs are regulated by the Public Benefits Organization Authority which oversees registration, compliance and enforcement of the PBO Act.

9. What if a PBO doesn’t re-register?

If a PBO fails to re-register under the new law, then it may lose its legal recognition and no longer operate as a PBO in Kenya.

PBO Act 2013 vs PBO Act 2024: Key Differences

Feature	PBO Act 2013 (Dormant)	PBO Act 2024 (Operational)
Legal Status	Enacted in 2013 but was never operationalized	Operational from May 14, 2024
NGO Registration	NGOs operated under NGO Coordination Act	All PBOs must now re-register under the PBO Act within 12 months
Financial Transparency	Limited to NGOs with > Ksh 1 Million	Applies to all PBOs – They must disclose their funding sources and their expenditures
Tax Provisions	The act offered little tax clarity	PBO Act 2024 is linked with new 2024 Tax Exemption Rules
Governance	Few Specific requirements	This offers strict requirements on boards, citizenship quotes for foreign NGOs
Terminology	“NGOs’ under the NGO Act	PBO Act 2024 Refers related organizations as “PBOs” under the law

Conclusion

The operationalization of the PBO Act brings a transformative shift in the regulation of Kenya’s non-profit sector.

It mandates transparency, financial discipline, structured governance, and provides significant tax reliefs for compliant organizations.

All NGOs operating in Kenya must re-register under the PBO Act by May 13, 2025, to retain legal status and access tax incentives.

Disclaimer

This article does not constitute legal or tax advice. For personalized guidance on complying with the PBO Act, consult your tax advisor or contact Bubi & Alexander to book a consultation.

Let’s Talk

Not sure how the PBO Act affects your NGO or international non-profit in Kenya?

Bubi & Alexander offers virtual CFO and compliance services tailored to the non-profit sector. We help you meet your regulatory obligations under the PBO Act while maximizing your impact.

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