The Kenya Revenue Authority (KRA) has issued a directive to employers, instructing them to start deducting Affordable Housing Levy (AHL) contributions from their employees’ gross salaries, effective from July 1, 2023.
The government, through the Ministry of Lands, Public Works, Housing, and Urban Development, backdated the mandatory contributions as proposed in the Finance Act, 2023.
As the designated collection agent, KRA now requires employers to remit 1.5 per cent AHL contributions from their employees’ salaries. This rate also applies to employers themselves. The Commissioner for Domestic Taxes at KRA stated in a recent statement, that employers must comply with the new directive.
Employers are obligated to declare the AHL deductions under sheet ‘M’ of the PAYE return on the itax platform. They are also required to generate a payment slip for ‘agency revenue’ under the tax sub-head ‘Housing Levy.’ Payments should be made at KRA agent banks or through mobile money.
KRA emphasizes that employers who fail to remit the AHL deductions will face penalties. The deductions will equal to two per cent of the outstanding funds for every month until compliance is achieved.
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The decision to backdate the payments was taken after the Appellate Court temporarily lifted conservatory orders. These orders had previously blocked the implementation of the contentious Finance Act, 2023. This development has cleared the way for the government to enforce critical taxes that had been suspended last month.
The introduction of the AHL contributions has been met with mixed reactions. Some citizens are expressing concerns about its impact on employees and businesses.
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As the implementation proceeds, the government is likely to face continued scrutiny regarding the effects of this levy on the nation’s housing initiatives and economic landscape.
