New provision that will see Kenyans not in payroll contribute to the Affordable Housing Tax
The Kenya Revenue Authority (KRA) reveals new provision in Affordable Housing Tax for Kenyans not on the payroll
The Kenya Revenue Authority (KRA) reveals new provision in Affordable Housing Tax for Kenyans not on the payroll.
KRA on Thursday, November 14, gave a deeper insight into how the Affordable Housing Levy will work under the proposed amendments making their way through Parliament.
Replying to economist Julians Amboko after he questioned whether the new tax law was locking out non-payroll Kenyans, KRA revealed that the Tax Law (Amendment) Bill 2024 has added a provision that will see Kenyans not in payroll contribute to the Affordable Housing Tax.
“Affordable Housing Levy is charged either on the gross salary of an employee under Section 4(2) (a) or gross income of a person under Section 4(2)(b), of the Affordable Housing Levy Act.
“The deduction provided for under Clause 7 of the Tax Laws Amendment Bill, 2024, is to allow for the deduction of the amount contributed by an employee which was not provided for until now,” KRA clarified.
According to KRA, the amendment makes sure everyone can contribute to the Affordable Housing Levy from their income, no matter where the money comes from.
“A contribution made by any other person is expenditure wholly and exclusively incurred by the person in the production of the income being taxed and is deductible under section 15 (1) an existing provision,” the statement continued.
The Authority argues there’s no drafting clean-up needed, those who contribute under 4 (2,b) of the Affordable Housing Act are covered under Sec15(1) of the Income Tax Act.
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Amboko had asked the Authority, “As presently structured, doesn’t the amendment limit the deductible allowance to only those on payroll income?”
He went on to ask, “What about those non-payroll Kenyans who may be contributing to the fund per Section 4 (2,b) of the Affordable Housing Act? Are the also locked out?”
KRA has however clarified that employees can now deduct their contributions to the Affordable Housing Levy from their taxable income.
Previously, this deduction was not allowed for employees, but the amendment to the tax law now makes it clear that these contributions are deductible, just like contributions made by other entities.
This change ensures that both employees and other contributors not on payroll can benefit from the tax deduction.
These new tax reforms pose a financial burden and strain for both Kenyans on payroll and those not on payroll.
Kenyans not on payroll may find it challenging to set aside money for this levy on top of their other expenses.
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