The government has retroactively applied the mandatory contribution to the Housing Fund, as stated in the Finance Act, 2023, starting from July 1. This decision comes after the Appellate Court lifted conservatory orders last week, allowing the implementation of the Act and the collection of taxes that were previously suspended.
According to a public notice issued by the Ministry of Lands, Public Works, Housing, and Urban Development on Wednesday, both employees and employers are required to contribute to the fund at a rate of 1.5 percent of the employee’s gross monthly salary and 1.5 percent of the employee’s monthly gross salary, respectively. This provision is outlined in the Finance Act, of 2023.
“The levy is payable by the employee and employer at a rate of one point five per centum of the employee’s gross monthly salary by the employee, and one point five per centum of the employee’s monthly gross salary by the employer, as outlined in the Finance Act 2023,” the notice read.
As a result of this levy, high-income earners, earning more than Ksh. 500,000 a month, will be subject to higher taxes—those with incomes up to Ksh. 800,000 will be charged at a rate of 32.5 percent, while those earning above Ksh. 800,000 will be charged at 35 percent of the additional income. The previous maximum tax rate on salaries was 30 percent.
The Ministry clarified that the employer must remit these contributions to the Housing Fund within nine working days after the end of each month in which the payments are due. Furthermore, the Kenya Revenue Authority (KRA) has been appointed as the collection agent and will provide details on the collection process through communication.