41. Tax Laws (Amendment) Act 2024

Quick Link: https://kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/2024/TheTaxLaws_Amendment_Act_No.12of2024.pdf

Below are the amendments made by the Act which have an effect on the taxation of the housing market in Kenya.

1. Affordable Housing Levy contributions to be deductible for tax purposes

Section 7 of the Act amends the Income Tax Act to allow for employee’s affordable housing levy contribution deducted by the employer in accordance with Section 5(1)(a) of the Affordable Housing Act, 2024 to be a deductible expense for purposes of computing taxable income.

The expected outcome is the ultimate increase in employees’ net pay by reducing the taxable income which will in turn reduce the amount of tax paid in the form of Pay as You Earn. This comes in response to the public outcry of the increasing taxes and levies which are becoming a significant financial burden.

1. Increase in the deductible interest for mortgage relief

The Act amends the Income Tax Act to increase the allowable deduction as mortgage relief on interest paid from a maximum of three hundred thousand Kenya Shillings (KES 300,000) to three hundred and sixty thousand Kenya Shillings (KES 360,000).

This is intended to incentivize mortgage uptake by reducing the income tax payable by a person servicing a mortgage.

Notably this proposal was in the withdrawn Finance Bill 2024.

1. Tax exemption on income earned from a project financed through grants

The Act proposes the amendment to the First Schedule to the Income Tax Act to allow for the exemption from taxation of income earned by non-resident contractors, subcontractors, employees and consultants for a project financed by a grant under an Agreement between the Government of Kenya and a development partner.

This is provided that:

1. The project is a hundred percent financed by the grant;

2. The contractors, subcontractors, employees and consultants retain their status as non-residents for the tenure of the Agreement; and

3. The income is directly related to the project.

Noting that the government is looking to potential international donor grants as one of the ways of financing its affordable housing projects, this tax exemption will greatly incentivize participation of foreign technical expertise and investment into such projects.

1. Increase in taxes and levies

   1. Imposition of excise duty on ceramic tiles and sanitary fixtures & glass

   The Act introduces the imposition of excise duty on imported ceramic sinks, wash basins, wash basins pedestals, baths, bidets, water closet pans, flushing, cisterns, urinals, at a rate 5% of the customs value or KES 50 per KG. Excise duty will also be imposed on imported ceramic wall tiles and imported floating glass and polished glass will be at a rate of 5% of the customs value or KES 200 per KG.

   1. Increase in the Railway Development Levy

   The Act amends the Miscellaneous Fees and Levies Act to increase the Railway Development Levy from 1.5% to 2%.

   The foregoing will translate to an increase in construction material costs.