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August 15, 2023

Kenya Revenue Authority notice clarifies allowances subject to Affordable Housing Levy, 2023

  • The Kenya Revenue Authority (KRA) has issued a public notice clarifying the employment allowances that constitute gross salary.
  • The notice clarifies the employment allowances that will form the basis for computing the 1.5% Affordable Housing Levy on various regular income received by employees as well as the general tax compliance requirements.
  • This Tax Alert highlights key allowances that will be included and excluded when computing the Affordable Housing Levy.

Executive summary

The Kenya Revenue Authority, on 15 August 2023, published a notice to the general public to clarify employment allowances that shall constitute gross salary for purposes of computing the Affordable Housing Levy. The Finance Act, 2023 did not define and or expound on the term "gross salary" for purposes of housing levy.

Detailed discussion

National Housing Development Fund

The Act was amended to introduce a mandatory housing levy to be contributed by both the employer and employee. The employer shall remit in respect of each employee:

  • The employer's contribution at 1.5% of the employee's monthly gross salary
  • The employee's contribution at 1.5% of the employee's monthly gross salary

It will be the employer's responsibility to remit the levy by the 9th day of the following month. Late remittance of the affordable housing levy will attract a penalty of 2% of the amount due for each month the payment remains unpaid.

The Kenya Revenue Authority has now clarified that gross monthly salary constitutes basic salary and regular cash allowances. The regular allowances will include housing, travel or commuter and car allowances, as well as any regular cash payments but excludes non-cash payments as well as income not paid regularly, such as leave allowance, bonus, gratuity, pension, severance pay, or any other terminal dues and benefits.

All employees, irrespective of their contract of service, must pay the Affordable Housing Levy. Employees paying the Affordable Housing Levy under section 31B of the Employment Act, 2007 are not eligible for Affordable Housing Relief under section 30A Income tax Act cap 470.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor