The Finance Act 2023 introduced a new levy called the Affordable Housing Levy (AHL). It officially kicked in on 1st July 2023 with the Kenya Revenue Authority (KRA) as the collecting agent.
Who Pays the Levy?
Every employee in Kenya, no matter their contract type, permanent, casual, or contract, must contribute. Employers are responsible for deducting and remitting the levy.
Gross monthly salary (used to calculate the levy) includes:
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Basic salary
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Regular cash allowances such as housing, commuter, and car allowance
Excluded items:
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Non-cash benefits
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Irregular payments such as bonuses, gratuity, severance pay, pension, or leave allowance
Note: If you are already paying a housing levy under Section 31B of the Employment Act, you cannot also claim Affordable Housing Relief under Section 30A of the Income Tax Act.
Why This Matters
For Employees
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Expect a slightly lower take-home pay.
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You will need clarity from HR on what is included in your gross salary.
For Employers and HR Teams
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Payroll systems must be updated immediately.
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Clear communication with employees is critical to avoid disputes.
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Non-compliance can result in penalties.
For Kenya’s Big Picture
The levy aims to fund affordable housing development, which is a key pillar of national development plans.
Action Points
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Audit payroll to make sure allowances and benefits are properly classified.
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Update systems to reflect the new deductions.
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Train HR and payroll staff on what is included and excluded in gross salary.
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Communicate clearly with employees to build trust and avoid confusion.
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Stay alert for further KRA clarifications or updates.
How FaidiHR Helps You Stay Compliant
Handling new levies and deductions does not have to be a headache. At FaidiHR, we:
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Automate payroll to factor in new rules like AHL.
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Offer compliance audits and HR consulting to keep you on the safe side.
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Provide employee communication templates to simplify complex tax changes.
Call us: +254 702 339 699
Email us: sales@faidihr.com
Let FaidiHR take care of payroll and compliance so you can focus on growing your business.