The Affordable Housing Relief Takes Effect
Published on Jan. 17, 2020, 3:33 p.m. | Category: Real Estate, Banking & Finance
Through the Finance Act 2019; Head A of the Third Schedule to the Income Tax Act was amended. The amendment will allow buyers to get a relief of 15% of gross contributions capped to KSh. 108,000 per year or KSh. 9,000 per month instead of the earlier amount of 15% of gross emoluments; closing a loophole that allowed persons to get a relief that is higher than the contributions made.The relief is meant for Kenyans buying houses under the Affordable Housing Scheme.
Employers will be allowed to reduce their employees’ Pay As You Earn (PAYE) payable by 15% of the gross contributions to the Affordable Housing Scheme and this relief will be termed as Affordable Housing Relief.
The Kenya Revenue Authority (KRA) will be required to issue details on tax relief to employers. Technically, saving into the housing fund has become voluntary as only workers who will have registered for the programme will enjoy the relief.Initial plans to force employers to deduct the equivalent of 1.5 per cent of workers’ pay to the housing fund mandatorily were dashed by the courts which ruled that the proposal was illegal.
Affordable housing is one of the strategic areas of focus of the President’s Big Four Agenda under which the Government intends to build 500,000 new houses by 2022.
The tax relief will be channeled to National Housing Development Fund which is meant to facilitate the achievement of ensuring that all Kenyans secure affordable housing.
The amendment to the Income Tax Act also includes the introduction of a compensation tax for power producers under a power producing agreement.
The Act also amended the Stamp Duty Act, which will exempt first time home buyers from paying the Stamp Duty Tax (normally 2% – 4% of the property value).
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