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

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