The Kenya Revenue Authority(KRA) has directed employers to include employee allowances when calculating for the final housing tax.

Speaking on Tuesday, KRA says such allowances were not included in the 2023 draft Finance Bill for the new housing tax law.

“Gross monthly salary” constitutes basic salary and regular cash allowances. This include housing, travel or commuter, car allowances and such regular cash payments and would exclude those that are non-cash as well as those not paid regularly such as leave allowance, bonus, gratuity, pension, severance pay or any other terminal dues and benefits.”

The contentious Finance Bill 2023, which attempted to impose a three percent housing tax on businesses and employees, was approved by the National Assembly in June.

Employers were required to contribute an equal amount to housing programmes, while employees were required to withhold 1.5 per cent of their pay.

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Taxing gross income means the government will have more money to fund its large-scale housing initiative.

Top government and corporate personnel who receive allowances worth thousands of shillings will be hardest hit by the new policy.

“All employees irrespective of their contract of service shall pay the affordable housing levy. Taxpayers paying housing levy under Section 31B of the Employment Act are not eligible for Affordable Housing Relief under the Section 30A of the Income Tax Act Cap. 470.”