KRA directs employers to deduct housing levy from March 19

The Kenya Revenue Authority (KRA) has announced that housing levy deductions for the government’s affordable housing project take effect from March 19.

The tax collector on Thursday directed employers to deduct 1.5 per cent from employees' gross salaries and remit it together with a matching contribution of 1.5 per cent for each employee.

“With effect from 19 March 2024, all employers are required to deduct the affordable housing levy from the employee's gross salary and remit together with the employer's contribution as follows: One point five per centum (1.5%) of the employee's gross monthly salary by the employee; One point five per centum (1.5%) of the employee's monthly gross salary by the employer,” KRA said.

Further, all other individuals who earn income in Kenya are required to remit 1.5 per cent of their gross income as housing levy to KRA.

The due date for remittance of the levy is the ninth working day after the end of the month.

Employers will make housing levy payments at KRA agent banks or mobile money through the eCitizen Paybill Number 222 222 or the USSD code *222#.

“Any person who fails to comply with the law shall be liable to payment of a penalty equivalent to three per cent (3%) of the unpaid funds for every month if the same remains unpaid,” added KRA.

President William Ruto on Tuesday signed the controversial Affordable Housing Bill into law, paving the way for the return of the housing levy deductions.

The levy had been declared unconstitutional by the High Court in 2023 and then the Court of Appeal upheld the decision, maintaining that the levy was introduced without a legal framework.

Ruto's government says the suspension provided room for restructuring the bill and now provides a new legal framework for the levy.

A fresh petition has however since been filed challenging the law on grounds that it attempts to introduce communist ideologies and that through it, the national government has now taken over the housing function from county governments.