Cabinet Secretary warns employers over housing levy deduction after court ruling
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Lands Cabinet Secretary, Alice Wahome warns employers over failure to remit housing levy deduction after court ruling
Lands Cabinet Secretary, Alice Wahome warns employers over failure to remit housing levy deduction after court ruling.
CS Alice Wahome of the Ministry of Lands, Public Works, Housing, and Urban Development has issued a warning to employers who fail to submit Housing Levy deduction forms, threatening legal action.
A day after the High Court put a stay order on the decision and ruled that the Housing Levy was unlawful, CS Wahome announced in a statement that the deductions would go ahead as it has been.
All employers must continue to deduct the Affordable Housing Levy (AHL) from each employee’s gross pay and submit it to the Kenya Revenue Authority (KRA) along with the employer’s following the Stay order, CS Wahome.
“Please note that the employer’s contribution to the Affordable Housing levy is an allowable deduction under Section 15 of the Income Tax Act,” CS Wahome said.
“An employer who fails to comply with the law shall be liable to payment of a penalty equivalent to two percent of the unpaid funds for every month if the same remains unpaid.”
Employers are required to deduct 1.5 percent of their employees’ salaries and match it with an equal amount from their kit.
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This comes after a three-judge bench consisting of Justice Lawrence Mugambi, Justice Christine Meoli, and Justice David Majanja declared the Housing Levy unconstitutional for lack of legal framework.
The three-judge bench found that the Finance Act 2023 amendment to Section 84 of the Finance Act amending the Employment Act introducing the Housing Levy is illegal.
“The levy lacks a comprehensive legal framework and is irrational. The levy violates the principles of taxation & as contained in the Finance Act 2023 is discriminatory and unfair for making a distinction between the formal & informal sectors thus creating unequal and inequitable principles and it is unconstitutional,” the judges ruled.
However, the court issued a 45-day stay order meaning the government will continue to collect the housing levy despite being rendered unconstitutional.
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