KRA to Crack Down on Employers Over Sh100bn Housing Levy Default

The Kenya Revenue Authority will soon crack down on employers who have evaded remitting over Sh100 billion in employees' deductions from the Affordable Housing Levy. The tax collector confirmed it is targeting companies that deducted the levy from workers but failed to submit the funds to the government.

Employers are required by law to deduct 1.5 percent of gross monthly pay from employees and match the contributions towards the housing levy. This means both the employee and employer contribute 1.5 percent each, totaling 3 percent of gross salary.

The backlog represents deductions collected from workers but never remitted to the Housing Development Fund. KRA has identified widespread non-compliance among employers across both private and public sectors. The tax authority will use existing enforcement powers under the Tax Procedures Act to recover the outstanding funds.

The Affordable Housing Levy was backdated to July 1, 2023, after the Court of Appeal lifted High Court orders blocking execution of the Finance Act 2023. All salaried Kenyans within KRA's radar now part with 1.5 percent of their gross pay towards the fund.

Failure to remit these funds as provided by law sees employers slapped with a penalty of 2 percent of the unpaid funds for every month of non-compliance. Some proposed legislation has reviewed this upwards to 3 percent monthly.

The collections are channelled towards the Housing Development Fund for financing President William Ruto's affordable housing plan. The levy's purpose is to provide funds for developing affordable housing and associated social infrastructure, plus providing affordable home financing to Kenyans.

Auditor-General Nancy Gathungu recently revealed that over 6,000 companies are exploiting a legislative loophole to avoid housing levy deductions. At least 6,390 companies have continued remitting PAYE taxes while ignoring their housing fund obligations.

The current legal framework designates KRA as the collector but failed to grant the taxman explicit enforcement powers. Oversight responsibility sits with the Affordable Housing Board, making recovery of civil debts difficult despite the 3 percent penalty regulation.

KRA has previously intensified enforcement in the informal sector, warning defaulters risk bank account freezes and PIN blocks. The tax authority deployed paramilitary revenue service assistants to identify defaulters, with measures including PIN deactivation, asset seizures, and travel bans.

In the 2024/2025 financial year, KRA collected Ksh73.2 billion against a projected Ksh63 billion, surpassing its housing levy revenue target. But the Sh100 billion in unremitted employee deductions remains a separate compliance breach.

The crackdown comes as the government seeks to fund its affordable housing programme, a central pillar seeking to provide housing solutions across income segments. The delay in remittance has significantly impacted the levy pool's growth.