KRA orders employers to deduct housing levy effective from July 1

The Kenya Revenue Authority (KRA) has now directed employers to deduct the Affordable Housing Levy (AHL) contributions from their employees’ gross salaries with effect from July 1, 2023.

This comes after the government, through the Ministry of Lands, Public Works, Housing and Urban Development, backdated the mandatory contributions as proposed in the Finance Act, 2023.

KRA, which was appointed as the collection agent, hence wants employers to remit it’s 1.5 per cent contribution alongside a similar rate for their employees as well.

“With effect from 1st July, 2023, all employers are required to deduct the AHL from the employee's gross salary and remit together with the employer's contribution,” the authority’s Commissioner for Domestic Taxes said in a statement on Friday.

“KRA wishes to further clarify that all employers are required to declare the AHL under sheet ‘M’ of the PAYE return on itax and generate a payment slip under the tax head ‘agency revenue’ and tax sub-head ‘Housing Levy’ and make payments at KRA agent banks or mobile money.”

KRA further noted that employers who fail to remit the deductions shall be liable to payment of a penalty equivalent to two per cent of the unpaid funds for every month until they comply with the law.

The government backdated the payments after the Appellate Court last week temporarily lifted conservatory orders barring the implementation of the contentious Finance Act, 2023 paving the way for the government to implement critical taxes that had been put on hold following its suspension late last month.