Finance Bill 2023 Proposal on Housing Levy
The recently released Finance Bill 2023 proposes to introduce a 3% housing levy. This is one of the Trumps cards played by The President when he assured Kenyans he was going to implement this proposal once he assumes office. The National Treasury has proposed changes to the employment act through the Finance Bill 2023 to implement an affordable housing agenda.
Section 31B of the employment act 2007
The proposed Bill seeks to introduce section 31B in the employment act 2007, requiring employers to contribute 3% of their employee’s basic salary to the national housing development fund. In addition, employees are also required to contribute 3% of their basic salary to the fund. Contributions made to the housing fund by qualifying employee’s will are used to purchase a home under an affordable scheme.
After 7 years of making contributions or upon retirement age, employees who do not meet affordable housing requirements can either transfer their contributions to a retirement benefits scheme or provident fund registered with the retirement benefits authority, transfer their contributions to any person registered and eligible for affordable housing or transfer their contributions to their spouse or children or receive their contributions in cash.
The employer shall remit the contributions to the National housing development fund by 9th of the following month after deductions were made. The introduction of this proposal indicates the new government’s commitment to affordable housing.
Employers’ Compliance Obligations of the housing levy in Kenya
If this proposal is enacted, it will increase compliance obligations. Currently, employers are required to deduct and remit PAYE, NSSF, NHIF and NITA from their employee’s salaries. Further, this levy will adequately reduce the disposable income available to taxpayers for consumption, savings, and investment. In perspective, an employee who earns a gross income of KES 50,000, will take home a net pay of KES 43,000. With the introduction of a 3% housing levy, the net pay will further decrease to KES 41,710.
If this Bill is acted on by the Parliament, in the long run, it is going to enhance the ability of homeownership among Kenyans. In the short run, Kenyans should brace themselves as this will significantly reduce their take home.
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