Corporate Art Donations: A Guide for Businesses

For a company, a donated painting is a business expense question before it's a tax question — it has to clear the same section 15(2)(w) test an individual's gift does, but it also has to survive your own finance team's books. Here's what's different about giving as a business rather than as a private collector.

The same rule, run through a company's accounts

Section 15(2)(w) of the Income Tax Act treats a company's donation to a qualifying charitable organisation the same way it treats an individual's: deductible from taxable income, provided the recipient holds a current KRA exemption certificate under the Income Tax (Charitable Organisations and Donations Exemption) Rules, 2024. Rule 26(1) caps this in a way that matters more to a company than to most individual donors — donations can't create a taxable loss, and no more than 50% of a given year's total donations can go to entities the company isn't otherwise connected to. A business giving across several unrelated causes in one year should have finance track that ratio, not assume it.

What CSR wants that the tax rule doesn't require

A CSR team typically wants three things beyond the bare tax deduction: a named programme to report against, a documented paper trail, and something visual for the annual report. None of that is a KRA requirement — it's good practice on top of it. The Rule 26(2) receipt and the recipient's exemption certificate satisfy the tax file; a written agreement naming what the gift funds and a closing report from the recipient is what actually makes a CSR write-up defensible if anyone asks where the money went.

In-kind giving adds a specific complication

A business donating artwork it owns — inventory, a corporate collection piece, or work commissioned and then gifted — needs a defensible valuation for the same reason an individual collector does, but the number also has to reconcile with how the piece sits on the company's own books beforehand. If the piece was carried as inventory or a fixed asset at a different value than the donation valuation, that gap is something the company's accountant needs to resolve at the point of transfer, not leave for the annual audit to find.

Before finance signs off

Confirm the recipient's KRA exemption certificate is current — a lapsed one invalidates the deduction even if the organisation's work is genuinely charitable. Get the Rule 26(2) receipt and keep it with the donation record, not just the CSR file. Track the 50%-to-unrelated-entities figure across the year if the company gives to more than one cause. And where the gift is in kind, get the valuation independently agreed before the transfer, not decided afterward to match whatever number is convenient.

This is a summary of the rule as it applies to a corporate donor, not tax advice for a specific company's accounts — that's what your tax agent or auditor is for, particularly on the valuation and reconciliation points above.

— Otieno Odhiambo