Kenya Revenue Authority (KRA) provided a clarification on what constitutes Gross pay for purposes of computing the Housing levy
The levy is deductible from employees at 1.5% of the gross pay with the employer contributing a similar amount 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 have clarified that gross pay constitutes regular payments such as Basic Salary, Cash allowances such as Car allowance, House allowance, Travel allowances among other regular cash payments.
Additionally, it makes it clear that non-regular cash payments like leave allowances, bonuses, gratuities, pensions, severance compensation, or any other terminal dues and benefits are not included in gross pay for determining the housing levy.
In addition, all employees irrespective of their contracts with the employer are eligible for Housing levy.
Lastly all taxpayers paying housing levy under Section 31B of the Employment Act are not eligible for Affordable Housing Relief under the Section 30A of the Income Tax Act Cap. 470.
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.
Please note that the employer’s contribution to the Affordable Housing Levy is an allowable deduction under Section 15 of the Income Tax Act.
An employer who fails to comply with the law shall be liable to payment of a penalty equivalent to two per cent of the unpaid funds for every month if the same remains unpaid.
