The Kenya Revenue Authority is now set to hit civil servants’ allowances in the implementation of the housing levy.
This is after the KRA announced that the housing levy will be deducted from the gross salary and not net salary as had been earlier anticipated.
“Gross monthly salary constitutes basic salary and regular cash allowances. This include housing, travel or commuter, car allowances and such regular cash payments and would exclude those that are non-cash as well as those not paid regularly such as leave allowance, bonus, gratuity, pension, severance pay or any other terminal dues and benefits,” said KRA in a statement.
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The taxman further explained that all employees irrespective of their contract of service shall pay the affordable housing levy.
“Taxpayers paying housing levy under Section 31B of the Employment Act are not eligible for Affordable Housing Relief under the Section 30A of the Income Tax Act Cap. 470,” said KRA.
The federation of employers has come out to lament over the deduction of the housing tax from the gross pay, arguing that this will put extra weight on employers and their workers.
“We were not anticipating its application on gross pay. Traditionally statutory deductions on the payroll have been on basic pay. This is an issue and a recent change,” said Jacqueline Mugo, the Federation of Kenya Employers (FKE) chief executive officer.
“That the government is now effecting statutory deductions on gross income has very heavy financial implications on both the employer and the employee.”
Under the controversial housing levy that was forced into effect by President William Ruto, all employees will have their salaries deducted to provide money for the controversial fund regardless of whether they are on permanent and pensionable terms or on contract-based engagements.
The deductions claimed to be 1.5 per cent were back-dated to July 1 following the lifting of a court order that had barred the implementation of the taxes.
