According to the Kenya Revenue Authority (KRA), casual workers and board members of public and private companies are required to pay the affordable housing levy.
In a letter dated September 13, 2023, the taxman stated that directors in State corporations, as well as those in various companies, must pay the housing tax because they, like all other workers, earn an income for rendering a service to the employer.
“Therefore, affordable housing levy is applicable to all employees, including directors, notwithstanding their terms of engagement or contract of service,” said the KRA’s deputy commissioner for policy and tax Advisory, Esther Wahome.
The Association of Pension Trustees and Administrators of Kenya had requested clarification from the taxman on whether the affordable housing levy (AHL) applies to board of directors’ quarterly allowances, monthly honoraria, and casual worker salaries.
However, the taxman states in the letter that gross monthly salary includes basic salary and regular cash allowances. According to KRA, Honoraria and directors’ allowances would qualify as regular allowances because directors’ meetings are often held at regular intervals and thus have a degree of regularity.
“Honoraria paid on a monthly basis and director’s allowances paid on a quarterly basis for a contract of service are therefore subject to affordable housing levy. Further, salaries paid to casuals for services provided for a period of time are also subject to AHL,” said Ms Wahome in the letter.
Based on wage employment statistics from the Kenya National Bureau of Statistics as of the end of 2022, an estimated three million Kenyans are contributing to the fund, with the majority of contributors being teachers and security forces.
The statutory deduction increases the tax burden on employed Kenyans, who are already struggling with rising living costs due to a freeze on salary increases and employment by Kenyan firms.
Employers contribute to the fund, raising the cost of doing business, according to the policy, which was first proposed and rejected during former President Uhuru Kenyatta’s second term.
The Treasury initially proposed changes to the Finance Act that would allow a three percent deduction from employees’ basic pay to help fund President Ruto’s ambitious plan to build low-cost homes.
