The Kenya Revenue Authority (KRA) has now directed employers to deduct Affordable Housing Levy (AHL) contributions from their employees’ gross salaries beginning July 1, 2023.
This comes after the government, through the Ministry of Lands, Public Works, Housing, and Urban Development, backdated the mandatory contributions proposed in the Finance Act of 2023.
KRA, which was appointed as the collection agent, thus wants employers to remit their 1.5 percent contribution as well as a similar rate for their employees.
“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.”
Employers who fail to remit deductions will be subject to a penalty equal to 2% of the unpaid funds for each month until they comply with the law, according to the KRA.
“KRA is committed to ensure employers are optimally supported and will continuously engage and collaborate with stakeholders to enhance compliance with the Affordable Housing Levy provisions.”
The payments were backdated after the Appellate Court temporarily lifted conservatory orders barring the implementation of the contentious Finance Act, 2023, allowing the government to implement critical taxes that had been put on hold following its suspension late last month.