KRA Intensifies Housing Levy Compliance Enforcement in the Informal Sector

 


The Kenya Revenue Authority (KRA) is increasing its efforts to enforce compliance with the 1.5% Affordable Housing Levy, particularly targeting the informal sector. This move includes potential freezes on bank accounts and PINs for non-compliant traders. This newsletter provides an overview of the situation, potential implications, and recommendations for businesses and individuals in the informal sector.

Affordable Housing Levy Act:

The Affordable Housing Levy is a mandatory contribution, set at 1.5% of gross monthly salary for employees, with a matching contribution from employers. Individuals who are self-employed are also required to pay 1.5% of their gross income. The aim of the fund is to provide money for the design, development and maintenance of affordable housing, institutional housing and associated social and physical infrastructure.

The Affordable Housing Act 2024 requires employers to deduct 1.5 percent of gross monthly pay to employees and match the contributions towards the housing levy.

KRA Enforcement Measures:

To improve compliance, the KRA is planning a crackdown on defaulters in the informal sector. Measures include:

  • Freezing bank accounts of non-compliant traders.
  • Deactivating PINs, which can prevent individuals from conducting business.
  • Deploying officers for on-site visits to businesses to check for registration and tax compliance.

Implications for the Informal Sector:

  • Financial Disruption: Freezing bank accounts can severely disrupt the financial activities of small traders, hindering their ability to transact and manage their businesses.
  • Compliance Burden: Many informal sector workers may find it difficult to comply with the levy due to a lack of awareness, financial literacy, and resources.
  • Economic Impact: The levy could disproportionately affect low-income earners, potentially exacerbating inequalities.

KRA Guidelines for Compliance:

The KRA has outlined the following guidelines for remitting the Affordable Housing Levy:

  • Employers: Must deduct 1.5% from the employee’s gross monthly salary and remit it along with a matching 1.5% contribution.
  • Self-Employed Individuals: Required to remit 1.5% of their gross monthly income.
  • Payment Deadline: The levy is due by the 9th working day after the end of the month in which the gross salary was due or gross income was received or accrued.
  • Declaration and Payment: Employers must declare the AHL under sheet “M” of the PAYE return on iTax, 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 through eCitizen Paybill Number. 222 222 or by dialing *222#.

Penalties for Non-Compliance:

Failure to remit the levy by the due date will result in a penalty of 3% of the unpaid amount for each month the levy remains unpaid.

Conclusion:

While the Affordable Housing Levy aims to address housing challenges, its implementation in the informal sector requires careful consideration to avoid disrupting livelihoods and hindering economic activities. A balanced approach that combines education, simplified compliance procedures, and reasonable enforcement measures is essential

Book a Free consultancy with us here

Visit our website to learn more

Follow our pages Facebook , Twitter, Linked In , Instagram , TikTok, Whatsapp Channel

Contact Us:

Email: info@rwkafrica.com
Phone: +254 728897429
Website: www.rwkafrica.com

Comments

Post a Comment

Popular posts from this blog

Clarification On Taxation Of Meals Provided By Employers

Image
Background:  The Kenya Revenue Authority (KRA) issued a Technical Circular (Ref: 1005/1) in March 2017, outlining guidelines for the taxation of employment income, particularly regarding benefits provided to employees. Among these benefits, the circular stated that meals provided to employees up to a value of Kshs. 48,000 per year per employee were not subject to tax, in accordance with Section 5(4)(f) of the Income Tax Act. Clarification:  Recently, there has been confusion regarding the interpretation and application of this provision. The KRA has clarified that if an employer provides meals exceeding the value of Kshs. 48,000 per annum per employee, the entire value of the meal becomes taxable income for the employee. Essentially, any amount spent on meals beyond the specified limit is now subject to taxation under the Income Tax Act. Implications for Employers: This clarification places the responsibility on employers to ensure compliance with tax regulations regarding emp...
Read more

Key Changes to NSSF Contributions

Image
  As of February 1, 2025, significant changes to the National Social Security Fund (NSSF) contributions will take effect, impacting salaried Kenyans and their take-home pay. Here’s a detailed overview of these changes and their implications for taxpayers.
Read more

Understanding Advance Tax: Essential Information for Vehicle Owners.

Image
  Welcome to the latest edition of the RWK & ASSOCIATES CPA(K) Newsletter. In this issue, we focus on Advance Tax , a critical requirement for all commercial and public service vehicle owners. Understanding how this tax operates and how to manage it effectively can save you time and avoid unnecessary complications. Advance Tax is a mandatory prepayment needed before a commercial or public service vehicle can be registered or licensed. The tax amount is determined by the vehicle's type and capacity. For example, vans, pick-ups, trucks, and similar vehicles incur a fee of Kshs. 2,500 per ton of load capacity or kshs 5000 whichever is higher. In contrast, saloons, station wagons, mini-buses, buses, and coaches are charged Kshs. 100 per passenger capacity per month or kshs 5000 annual amount whichever is higher. It is important to note that Advance Tax is not a final tax. Taxpayers must report this payment in their annual income tax returns and settle any additional taxes that ...
Read more