Employees and employers are slated to continue the controversial housing levy deductions for the month of January, as directed by the Court of Appeal pending the forthcoming ruling on January 26th.
In response to a government appeal challenging the High Court’s earlier order, Appeal judges Lydia Achode, John Mativo, and Mwaniki Gachoka extended the conservatory order. This extension allows the government to proceed with collecting the housing tax for this month, maintaining the current situation until the court delivers its ruling.
“Upon hearing the parties, all the applications are consolidated as they arise from the same judgment of the High Court dated 28th November 2023. Civil Application No. E577/2023 is designated as the lead file. The ruling on these consolidated applications will be delivered on 26th January 2024. In the meantime, the status quo obtaining as of today shall be maintained until the delivery of the ruling,” the court order reads.
Initially set to expire on January 10th, the conservatory order granted by the High Court has now been extended. This means the government will continue the housing levy deductions.
What is the housing levy?
The housing levy, part of the affordable housing fund, operates on a gross-on-gross taxation system. This means that the Kenya Revenue Authority (KRA) uses the same gross income to calculate both the housing levy and the Pay As You Earn (PAYE), potentially resulting in double taxation for workers.
Employees contribute 1.5 percent of their income, matched by an equal percentage from employers.
According to the Income Tax Act, Kenyan residents making contributions toward the affordable housing scheme are eligible for tax relief equal to 15% of their gross salary, capped at Kshs. 108,000 per annum, provided they’ve applied for a house under this scheme. This relief helps reduce the contributor’s tax liability by deducting the applicable relief from the computed gross tax.
However, individuals who’ve been allocated a house under the affordable housing scheme and have availed themselves of the housing relief are not entitled to a similar relief in any subsequent house purchases under this scheme.
