Housing Levy Updates 2024


Background

The journey of the Housing Levy in Kenya began with its proposal on June 26, 2023, as part of the Finance Bill of 2023, mandating a 3 percent deduction from employees' gross salaries towards the National Housing Development Fund (NHDF). Initially contentious, the levy evolved from a contribution to a mandatory deduction, directing funds towards the Affordable Housing Program. Despite heated debates and objections during the third reading in June-July 2023, the proposal was ultimately passed, with 184 members of the National Assembly in support. Amendments ensued, responding to stakeholder feedback by reducing the rate to 1.5 percent and transferring the levy into a tax collected by the Kenya Revenue Authority (KRA). Finally, in March 2024, President William Ruto signed the Affordable Housing Bill into law, expanding the levy's contributors to include individuals in the informal sector, thus addressing previous constitutional concerns.

Current Changes

  • On 19th March 2024 President William Ruto signed into law the Affordable Housing Bill, 2023, paving the way for the reinstatement of housing levy deductions from the month of March.
  • Employees will now be deducted 1.5 percent of their gross monthly pay, the amount that will be matched by their employer.
  • Kenyans in the informal sector and others not salaried will pay 1.5 percent of their monthly gross earnings.
  • Under the new provisions, proposed by Senate, governors will establish county liaison committees tasked with overseeing the implementation of the affordable housing programme.

Proposed exemptions

·         If you belong to one of these groups, Senate might soon excuse you from the 1.5% burden:

·         Individuals diagnosed with a terminal illness by a certified medical professional.

·         Residents in rural areas who hold a title deed registered in their name.

·         People engaged in agricultural farming or business with an annual turnover of less than Ksh288,000.

·         Individuals with a mortgage outside the scope of the act. (Ensures those with existing housing finance arrangements are not doubly burdened.)

·         Kenyans aged 50 and above who are involved in informal business activities.

·         Any person with less than five years until statutory retirement at the enactment of this act (Aims to provide relief to those near retirement)

 Note: The proposed exemptions require the Cabinet Secretary to issue a Gazette notice specifying the exempted individuals, as stated by the Majority Leader.

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