Landlords in Kenya are now required to contribute to the government's Affordable Housing initiative, with a new levy taking effect on Thursday.

The Kenya Revenue Authority (KRA) announced the Affordable Housing Levy (AHL) in a letter dated May 6th, signed by the Head of Domestic Taxes Department in the North Rift region.

The levy requires landlords to remit 1.5 per cent of their gross rental income on the 9th of every month going forward.

This applies not only to rent but also to gross sales receipts and any other sales before Value Added Tax (VAT) is applied.

"This is, therefore, to remind you to remit the AHL by the due date of the 9th of every month, starting this month of May 2024. For clarity, AHL will be charged at the rate of 1.5 per cent on the gross income received or accrued," the KRA stated in the letter.

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The Affordable Housing Act, enacted in 2024, introduced this levy alongside a similar 1.5 per cent levy on employee salaries and individual gross income not already subject to the AHL.

Employers are required to match their employee's contributions, effectively doubling the levy collected from employed Kenyans.

For employers, declaring and remitting the AHL is a straightforward process.

The levy needs to be declared under sheet "M" of the PAYE return on iTax, the Kenyan online tax filing platform.

A payment slip must then be generated under the tax head "agency revenue" with the sub-head "Housing Levy."

Finally, payment can be made at KRA designated banks, mobile money platforms, or through the eCitizen Paybill system.

The KRA clarified that the employer's contribution to the AHL is considered an allowable deduction under Section 15 of the Income Tax Act.

Landlords and other individuals with questions regarding the AHL are encouraged to contact their designated KRA account manager or visit their nearest KRA office.

This new levy is expected to generate significant funds for the government's ambitious Affordable Housing initiative, aiming to increase access to affordable housing options for Kenyans.