Editor's Review

Despite ruling the Housing Levy is unconstitutional, a three-judge bench issued a 45-day stay order meaning the deduction will continue until January 10, 2024.

Ministry of Lands, Public Works, Housing and Urban Development CS Alice Wahome has warned employers who fail to remit Housing Levy deductions that they will face penalties. 

In a statement a day after the High Court declared the Housing Levy unconstitutional and at the same time issued a stay order on the judgment,  CS Wahome said the deductions should continue,

Following the Stay order, CS Wahome all employers shall be required to continue to deduct the Affordable Housing Levy (AHL) from the employee’s gross salary and continue to remit to the Kenya Revenue Authority (KRA) together with the Employer’s,

"Please note that the employer’s contribution to the Affordable Housing levy is an allowable deduction under Section 15 of the Income Tax Act," CS Wahome said. 

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Justice David Majanja (Centre), Justice Lawrence Mugambi and  Justice Christine Meol. PHOTO | COURTESY

"An employer who fails to comply with the law shall be liable to payment of a penalty equivalent to two percent of the unpaid funds for every month if the same remains unpaid."

Employers are required to deduct 1.5 percent of their employees' salaries and match it with an equal amount from their pockets.  

A three-judge bench consisting of Justice Lawrence Mugambi, Justice Christine Meoli, and Justice David Majanja declared the Housing Levy unconstitutional for lack of legal framework.

The three-judge bench found that the Finance Act 2023 amendment to Section 84 of the Finance Act amending the Employment Act introducing the Housing Levy is illegal.

"The levy lacks a comprehensive legal framework and is irrational. The levy violates the principles of taxation & as contained in the Finance Act 2023 is discriminatory and unfair for making a distinction between the formal & informal sectors thus creating unequal and inequitable principles and it is unconstitutional," the judges ruled.