August 15, 2023
Kenya Revenue Authority notice clarifies allowances subject to Affordable Housing Levy, 2023
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.
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:
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