The Kenyan High Court has ruled that golf clubs and similar recreational clubs are exempt from paying Value Added Tax (VAT) on membership fees and entrance fees.
Justice Nixon Sifuna distinguished between “capital” (club funds) and “income” (profit from services). Membership fees are considered contributions to maintain club facilities, not payment for services, and thus not subject to VAT.
Clubs Challenged Tax Demand
The Kenya Revenue Authority (KRA) had demanded VAT on membership fees from several clubs, including Sigona Golf Club and Thika Golf Club.
However, the clubs argued they were exempt as non-profit organizations. The Tax Appeals Tribunal sided with the clubs in 2020, prompting KRA’s appeal to the High Court.
Justice Sifuna, citing a similar ruling in the Philippines, stated that membership fees are not payments for services. He criticized KRA’s approach as “overzealous” and potentially leading to “double taxation” as members might already pay VAT on services within the clubs.
“While this court as the tax court will facilitate legitimate collection of tax for the economy, it has at the same time, the responsibility to guard against overzealousness, greed, unfairness, and unconscionableness in tax collection. While taxes are inevitable and a legitimate source of government revenue, we cannot tax everything and anything,” said the ruling by Justice Sifuna.
This ruling aligns with international practices supporting non-profit clubs and fostering a healthy business environment.
