Kenya: New affordable housing levy on employees’ gross salaries

Finance Act 2023 introduced a new affordable housing levy effective 1 July 2023

11 September 2023

The Finance Act 2023 introduced a new affordable housing levy (AHL) effective 1 July 2023.

Both employees and employers must pay monthly AHL equal to 1.5% of employees’ gross salaries.
The funds collected are to be used for development of affordable housing and associated social and physical infrastructure, as well as the provision of affordable home financing to Kenyans.
Similar to Pay-as-you-Earn (PAYE), AHL is to be remitted within nine working days after the end of the month in which payments are due. A 2% penalty will apply on amounts unpaid by the due date, applicable for every month the amounts remain unpaid.
The Ministry of Lands, Public Works, Housing and Urban Development issued a public notice dated 3 August 2023 appointing the Kenya Revenue Authority (KRA) as the collection agent for the AHL.
KRA subsequently issued a notice dated 4 August 2023 stating that employers must declare the AHL under sheet ‘M’ of the PAYE return on iTax and generate a payment slip under the tax head ‘agency revenue’ and sub-head ‘Housing Levy.’ KRA also confirmed that the AHL payment slip will be generated separately from that of PAYE and other payroll levies such as National Industrial Training Authority levy (NITA).
Further, in the 4 August 2023 notice, the KRA asserted that the employer’s contribution is an allowable deduction under Section 15 of the Income Tax Act.

Read an August 2023 report [PDF 441 KB] prepared by the KPMG member firm in Kenya

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