KRA Ropes In Interns In Changes To Housing Levy Deductions

The Kenya Revenue Authority (KRA) on Tuesday, August 15 announced that the deduction on the Affordable Housing Levy (AHL) will be on gross monthly salary and not basic pay and the AHL will be applied to all employees irrespective of contract of service.

In a notice, the taxman clarified that the gross monthly salary comprises a basic salary as well as regular cash allowances that include commuter, car and housing allowances.

This, therefore, means that all workers will pay the 1.5 per cent Housing Levy based on their gross salary.

"Gross monthly salary" constitutes basic salary and regular cash allowances. This includes housing, travel or commuter, car allowances and such regular cash payments and would exclude those that are non-cash as well as those not paid regularly such as leave allowance, bonus, gratuity, pension, severance pay or any other terminal dues and benefits," stated KRA in part.

The tax authority further noted that the AHL will be applied to all employees regardless of their type of contract of service, which includes interns.

"All employees irrespective of their contract of service shall pay the affordable housing levy.

"Taxpayers paying housing levy under Section 31B of the Employment Act are not eligible for Affordable Housing Relief under Section 30A of the Income Tax Act Cap. 470," added KRA.

Initially, Kenyan workers were required to pay 1.5 per cent of the basic pay, with the increment meaning that Kenyans will pay more for the Housing Levy contrary to what was announced earlier.

Furthermore, KRA stated that everyone is subjected to the 1.5 per cent AHL regardless of whether they have a mortgage or not.

On Friday, August 4, KRA confirmed the backdating of AHL which was suspended alongside the Finance Act by the High Court in July.

After the Court of Appeal lifted conservatory orders issued against the implementation of the act, the government moved to compel the employers to submit monies that were due for July 2023.

What this means is that employers will be required to remit the housing levy for both July and August, a move which could see employees suffer double deductions by the start of September.

The taxman directed that the employers are obligated to remit the 1.5 per cent Housing Levy deduction by the ninth of every month, with employees also paying their 1.5 per cent contributions within the same period, a total of 3 per cent.