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Kenyans start receiving refunds for erroneous housing levy deductions

KRA sought clarification from the Attorney General on collection of Affordable Housing Levy

Man holding empty wallet(Twitter)
  • Attorney General's guidance to KRA
  • Refunds from housing levy deductions in January 2024 payrolls
  • New law to re-introduce Affordable Housing Levy

The Court of Appeal issued a significant pronouncement on January 26, 2024 barring the government from collection of the controversial Affordable Housing Levy, which was declared unconstitutional in December 2023.

The Kenya Revenue Authority (KRA) sought guidance from Attorney General Justin Muturi regarding the government's position on the matter.

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The Attorney General responded on February 21, shedding light on the legal intricacies surrounding the housing levy.

According to the Attorney General's guidance, there exists no legal basis for the collection and administration of the housing levy as per Section 84 of the Finance Act 2023's amendment to the Employment Act.

"The upshot of this is that there is no legal basis on which the Housing Levy as provided in section 84 of the Finance Act, can be implemented," the AG wrote in a letter to KRA.

Crucially, the Attorney General emphasized that as of the date of the Court of Appeal's pronouncement, January 26, 2024, there was no legal foundation for the levy.

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This declaration has far-reaching implications for Kenyans whose salaries had already been processed and were deducted the AFH levy in January 2024.

The Attorney General's guidance provided clarity on this matter, indicating that since collections were required to be remitted by the 9th working day of the following month, there is a window for the refund of deducted amounts.

"On the 26 January, 2024, there is no legal provision that enables the collection and administration of the Housing Levy," the AG said.

This means that employers who had already made provision for the levy were not required to submit the same to KRA.

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The news desk is aware that several companies have already started the process of refunding employees whose salaries were deducted in January 2024.

This revelation brings relief to those who have been eagerly awaiting clarification on the status of their housing levy deductions.

It underscores the importance of legal clarity and adherence to due process in matters concerning taxation and statutory deductions.

The housing levy issue has been a subject of intense debate and legal battles since its inception.

Its supporters, led by President William Ruto, argue that it is a crucial mechanism for financing affordable housing initiatives, addressing the housing deficit, stimulating economic growth and providing jobs.

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However, critics have raise concerns about its implementation, legality, and potential impact on taxpayers and the economy.

The relief for Kenyans might be short lived as the government is in advanced stages of the passing the Affordable Housing Bill 2023, which will give the government mandate to reintroduce the AFH Levy again.

Already approved by the National Assembly, the bill is now awaiting debate in the Senate.

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According to Majority Leader Kimani Ichung'wa the government intends to fast track the new law, targeting March or April salaries to resume collection.

The new bill seeks to address concerns that were raised by the High Court which declared the levy unconstitutional.

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