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Finance Bill 2023: Kenyans to contribute 3% of salaries to national housing fund

The Finance Bill 2023 has proposed several amendments to the Employment Act of 2007

President William Ruto peruses through a document at State House

The Finance Bill 2023 proposes the amendment of the Employment Act of 2007 to require employers to contribute to the National Housing Development Fund for each of their employees.

This means that employers will now have to pay three percent of their employees' monthly basic salary to the Fund, and employees will also be required to contribute three percent of their monthly basic salary.

However, the total contribution from both the employer and employee cannot exceed Sh5,000 per month.

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The contributions made to the Fund will benefit employees in two ways.

Firstly, employees who qualify for affordable housing can use their contributions to buy a house under the affordable housing scheme.

Secondly, for those who are not eligible for affordable housing, their contributions will be transferred to a retirement benefits or pension scheme, or to someone registered and eligible for affordable housing under the National Housing Development Fund.

Alternatively, they may receive their contributions in cash, but this will be subject to income tax.

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All contributions made to the Fund will earn interest based on the return on the Fund.

If the Finance Bill 2023 is passed, employers will have to remit both employee and employer contributions to the Fund before the ninth day of the following month after the deduction was made.

To participate in the affordable housing scheme, the Cabinet Secretary responsible for matters relating to housing, in consultation with the Cabinet Secretary responsible for matters relating to finance, will make Regulations specifying the qualifications required.

The new requirement for employers to contribute to the National Housing Development Fund is expected to impact the disposable income of Kenyan households.

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If the Finance Bill 2023 is passed by Parliament, the three percent deduction from employees' salaries means that they will have less take-home pay each month, which could potentially affect their purchasing power.

The Finance Bill 2023 also proposed an amendment to the Employment Act of 2007 to provide for 35 per cent income tax on all monthly salaries above Sh500,000.

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