Key Stipulations of the KRA’s Affordable Housing Levy Directive
The KRA’s directive recently released a public notice clarifying how the Affordable Housing Levy is calculated and deducted from employees’ salaries. The key stipulations are as follows:
- Calculation Based on Gross Pay: The Affordable Housing Levy will now be calculated based on gross pay. Gross pay has been defined as basic salary and regular cash allowances such as housing, travel or commuter, car allowances, and similar regular cash payments. However, gross pay excludes non-cash payments and irregular payments such as leave allowance, bonus, gratuity, pension, severance pay, or any other terminal benefits.
- Applicability to All Employees: All employees, regardless of their contract type, are subject to the Affordable Housing Levy. This applies to both permanent and pensionable terms as well as contract-based engagements.
- Affordable Housing Relief: Taxpayers paying housing levy under Section 31B of the Employment Act are not eligible for Affordable Housing Relief under Section 30A of the Income Tax Act Cap. 470.
Implications for Employers and Employees
For employers, the transition to calculating the Affordable Housing Levy based on gross pay and including additional allowances means a more significant administrative burden and financial commitment.
Employees, on the other hand, will experience changes in their take-home pay due to increased deductions. In addition, this may also affect the nature of the contracts of employees who were previously on contracts based on net salaries.“Understanding the Housing Levy directive is paramount for businesses to adapt effectively. Adili Group is committed to providing detailed guidance and practical solutions to mitigate the impact of these changes,” Issa Juma, Senior Manager at Adili Outsourcing Services.
‘’Adili Group’s outsourcing team is here to ensure a seamless transition as the new regulations take effect. Our compliance and risk management experts are equipped to help your business navigate this evolving landscape,’’ Evelyn Muthama, Senior Consultant, Adili Outsourcing Services Limited
For further information, please contact us at info@adili.africa
