KRA Says Housing Tax Will Be Deducted From Basic Salary, Cash Allowances: "All Employees Shall Pay"

• The Kenya Revenue Authority noted that gross monthly salary constitutes basic salary and other regular cash allowances
• KRA, which was appointed the collection agent of the housing levy, said all employees, irrespective of their contract of service, shall pay the affordable housing tax
• The government backdated the housing tax to July 1 after the Court of Appeal lifted the suspension of the Finance Act 2023

The Kenya Revenue Authority has clarified how the housing tax is deducted from employees' salaries.

How is housing tax deducted?

In a statement issued on Tuesday, August 15, the taxman noted the levy is deducted from the basic salary and other allowances.

"Gross monthly salary constitutes basic salary and other regular cash allowances. This includes housing, travel or commuter, car allowances and such regular payments and would exclude those that are non-cash as well as those not paid regularly such as leave allowance, bonus, gratuity, pension, gratuity, pension, severance pay or any other terminal dues or benefits.

All employees, irrespective of their contract of service, shall pay the affordable housing levy," KRA stated.

Why gov't backdated housing tax

On Thursday, August 3, TUKO.co.ke reported the government backdated the housing tax to July 1 after the Court of Appeal lifted the suspension of the Finance Act 2023. KRA was appointed as the collection agent.

In an internal circular, KRA ordered its officers to follow specific dates provided for in the Finance Act 2023 while implementing tax changes.

“All officers are advised to read this circular and the specific provisions of Finance Act 2023. Further, officers are advised that the provisions of the Act shall come into effect on the dates specified in Section 1 of the Act."

According to the new housing tax, employees will be deducted 1.5% of their gross monthly income to fund the affordable housing programme, as the employer matches the same contribution.

However, the total amount contributed by the employee and their employer cannot exceed KSh 5,000.

Okiya Omtatah's appeal

Following the reversal, Busia Senator and celebrated activist Okiya Omtatah took his battle against the implementation of the Contentious Finance Act 2023 to the Supreme Court.

Omtatah, alongside Eliud Karanja Matindi, Benson Odiwuor Otieno, Blair Angima Oigoro, who are the first, second, fourth and fifth respondents in the matter by Treasury CS Njuguna Ndung'u notified the Supreme Court that they intended to appeal against the entire decision of the three judges.

The lawmaker, in a past event attended by President William Ruto in Busia, blankly told the head of state to review the law lest he challenges him in court and lived up to his word.