Employers and employees are agonising from the reality of digging deeper into their pockets after government has backdated the mandatory contribution towards the controversial Housing Levy as provided for in the contentious Finance Act, 2023 to July 1 this year.
In a public notice, the Ministry of Lands, Public Works, Housing and Urban Development said deductions of the levy will now take effect from July 1, 2023.
The ministry said the levy is payable by the employee and employer at a rate of one point five per cent of the employee’s gross monthly salary by the employee, and one point five per cent of the employee’s monthly gross salary by the employer.
This follows the lifting of the orders barring implementation of the Act by the Appellate Court last week.
The court temporarily lifted conservatory orders barring the implementation of the Finance Act 2023, paving the way for the government to implement deductions of new taxes.
This translates to high-income earners of more than Sh500,000 a month being charged tax at 32.5 per cent for monies up to Sh800,000, while those above Sh800,000 will be charged 35 per cent on the extra cash.
The government has appointed the Kenya Revenue Authority as the collection agent.
The levy is payable by the employee and employer at a rate of 1.5 percent of the employee’s gross monthly salary.
“The State Department for Housing and Urban Development would like to inform the members of the public that the Affordable Housing Levy is now in effect from 1 July 2023. The levy is payable by the employee and employer at a rate of one point five per centum of the employee’s gross monthly salary by the employee, and one point five per centum of the employee’s monthly gross salary by the employer, as outlined in the Finance Act 2023” reads the notice.
“This shall be remitted by the employer not later than nine working days after the end of the month in which the payments are due” it states.
The Finance Act 2023 provides that the deductions shall be remitted by the employer not later than nine working days after the end of the month in which the payments are due.
The Kenya Revenue Authority-KRA is to issue a communication advising on the mode of collection of the deductions.
“The Cabinet Secretary, Ministry of Lands, Public Works, Housing and Urban Development has appointed the Kenya Revenue Authority (KRA) as the collection agent. KRA will issue a communication advising on the mode of collection.” The notice reads in part.
Busia Senator Okiya Omtatah has already moved to the Supreme Court seeking to overturn the Court of Appeal decision that allowed the implementation of the Finance Act 2023.
He wants the new tax law suspended pending the determination of his case at the High Court that is challenging its legality.
While vacating the orders last week, the judges concurred with Treasury Cabinet Secretary Njuguna Ndung’u and Attorney General Justin Muturi that there will be serious irreversible economic consequences if the stay of the conservatory orders is not granted.
“The application by (the state) has merit and the same is allowed as prayed with the effect that the order made on July 10, 2023, suspending the Finance Act 2023, and the order prohibiting the implementation of the Finance Act 2023, be and is hereby lifted pending the hearing and determination of the appeal.” The judges ruled.
