Contributions made on employees to the National Housing Development Fund levy should qualify as ‘staff costs’, which are allowable for corporation tax purposes, experts at PricewaterhouseCoopers have suggested.
This is because, The Draft Housing Fund Regulations, 2018, does not provide any tax incentives for employers.
“However, loss making or tax exempt employers would be unable to benefit from claiming this deduction,” alerted the PwC experts in a Tax Alert notice shared to the market.
Also, some employees are likely to suffer double taxation if the regulations contained in the draft are not corrected. They include non-residents individuals who are not eligible for the affordable housing scheme even though they will be required by law to make contributions, and the Kenyans who are not first time home owner and earn more than Ksh100,000, if they opt to withdraw their contributions in cash.
“We hope that this is an oversight which can be remedied while the regulations are still being fine-tuned,” says the report.
A Kenyan who has applied for housing under the scheme and is awaiting allocation is entitled to a relief equal to 15 per cent of the gross emoluments up to Ksh108,000 per annum. This will ease the PAYE burden on an employee.
For those already allocated a house, they will not be eligible for further tax cuts.
James Macharia, the cabinet secretary for Transport, Infrastructure, Housing, Urban Development and Public Works, released the housing fund regulations on 5 November 2018, as a response to Uhuru Kenyatta’s Big Four Agenda campaign promise.
All employers and employees are required to register with the Fund and make monthly levy contributions. Each is expected to contribute 1.5 per cent of the employee’s monthly basic salary with the combined contribution capped at Ksh5,000.
