The Affordable Housing Levy (AHL) has been a subject of heated debate and court battles. However, following the enactment of the Affordable Housing Act (2024), it is now a mandatory statutory deduction that every employer must comply with to avoid heavy penalties from the Kenya Revenue Authority (KRA).

The Rates: Who Pays What?

Unlike NSSF or NHIF which have caps, the Housing Levy is a percentage of the Gross Salary:

  • Employee Contribution: 1.5% of gross monthly salary.
  • Employer Contribution: 1.5% of the employee's gross monthly salary (matching contribution).
  • Total Remittance: 3% of the gross payroll.

Key Compliance Points for Business Owners

  1. Effective Date: The deductions are active. If you have not been remitting, you are accumulating arrears.
  2. Gross Salary Definition: The levy is calculated on the Gross salary (Basic Pay + Allowances). It is not just on the basic pay.
  3. Casual Laborers: This is a common pitfall. The Act does not exempt casual laborers. If you pay someone a wage, you must deduct the levy, even if they are not permanent staff.
  4. Remittance Deadline: Just like PAYE, the levy must be remitted by the 9th of the following month.

The Penalty for Non-Compliance

The KRA is aggressive on this. Failing to remit the levy attracts a penalty of 2% of the unpaid amount for every month it remains unpaid. This interest compounds and can quickly become a massive debt for your business.

Is it Tax Deductible?

Yes. The Act allows employers to treat their 1.5% contribution as an allowable expense when calculating their Corporate Tax, reducing the sting slightly.

Worried About a KRA Audit?
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