New bill proposes stiff penalty for failure to remit housing levy

The penalty on non-remittance has been reviewed upwards by one percent from an earlier proposed two percent in the Finance Bill, 2023.

And to address the criticism raised by the court that the levy was discriminatory by only targeting salaried Kenyans, the government also expanded the tax to rope in incomes other than monthly salaries.

"The levy shall be at the rate of 1.5 percent of the gross salary of an employer or the gross income of a person received or accrued which is not subject to the levy," adds the Bill.

It further seeks to give effect to Article 43 (1)(b) of the Constitution on the right to accessible and adequate housing.

"Where an amount of the levy remains unpaid after the date when it becomes due and payable by a person liable to remit the amount, a penalty equal to three percent of the unpaid amount shall be due and payable for each month or part thereof that the amount remains unpaid and shall be summarily recovered as a civil debt from the person liable to remit the amount," reads the Bill in part.

National Assembly Majority Leader Kimani Ichungwa tabled the Bill Thursday, which stipulates that employers are required to remit a 1.5 percent housing levy deducted from employees to the government in nine days to fund the affordable housing scheme. Employers will also be required to remit their top-up within the same period.

A week ago, the High Court in Nairobi declared the Housing Levy contained in the Finance Act, 2023, unconstitutional.

The court said that the levy was unconstitutional and vague and that there was no law allowing the Kenya Revenue Authority (KRA) to collect it.

The court also found that the levy was discriminatory since it targeted only employed Kenyans and the government did not demonstrate why it excluded other categories of income earners.

And in a move seemingly to circumvent the ruling and avoid a contest at the appellate court, the State has introduced a framework on how the levy will be administered and an eligibility criterion.

For one to be eligible for the Housing Affordable Housing unit, he or she must be a Kenyan citizen who is 18 years old and holds an identity card.

A person who meets the criteria shall make an application to the relevant agency and his or her application shall be accompanied by proof of at least 10 percent of the value of the affordable housing unit, a copy of the national ID, a copy of the KRA PIN certificate and any other information to be determined by the relevant agency.

"In the determination of the allocation of an affordable housing unit, the agency shall give preference to marginalised persons, vulnerable groups, youth, women and persons with disabilities," states the Bill.

An eligible person can be considered for a loan for the purchase of the housing unit and upon receipt of the loan, an agency shall evaluate the application to ensure compliance.

Moreover, an eligible person may make voluntary savings for the purpose of raising a deposit towards the allocation of an affordable housing unit.

According to the Bill, the levy shall be managed by the Affordable Housing Board.

The board shall consist of a non-executive chairperson appointed by the president, the Principal Secretary of the National Treasury or his representative designated in writing, PS of the State Department for the time being responsible for matters relating to affordable housing and three other persons, not being public officers, and who shall possess qualifications in built environment, finance or law.

Three other persons who shall be appointed by the Cabinet Secretary shall be a nominee of the Council of County Governors, a nominee of the Central Organisation of Trade Unions and a nominee from the Federation of Kenyan Employers.

It will also consist of the Chief Executive Officer who shall have no right to vote at a meeting of the board.