Economy
Parastatal board members escape housing tax dragnet
Thursday October 26 2023
Attorney General Justin Muturi before the National Assembly Energy Committee at Continental House Nairobi on October 12, 2023. PHOTO | DENNIS ONSONGO | NMG
The Kenya Revenue Authority (KRA) has suffered a blow in its quest to net in more taxes after Attorney General (AG)Justin Muturi clarified that the board of directors of Kenyan firms as well as those in State corporations should not pay the affordable housing levy.
Mr Muturi in a recent letter to the management of Kenyatta National Hospital (KNH) who had sought his advice on the matter has stated that board members are not employees.
He cited several judgments where the court ruled that a board member is not a worker in any State corporations or companies and such, they cannot pay affordable housing tax.
Read: No housing levy refunds in revised President Ruto tax plan
“Therefore, based on the aforementioned provisions of the law and decided cases, board members are not employees of State corporations. Subsequently, KRA has no basis for expanding the scope of implementing the affordable housing levy where the employer-employee relationship does not exist,” said Mr Muturi in the September 22, 2023 letter.
The AG clarified that KRA erred in categorising board members as secondary employees as the same is not supported by law.
He said under section 6(e) of the State Corporation Act, there is a deductible express legislative scheme not to categorise board members as employees.
“Accordingly, the demand notice issued to KNH should be revised to the extent of this advisory,” he said.
The AG’s advise comes barely a few weeks after KRA said directors in State corporations as well as those in various companies must pay the housing tax because they earn an income for rendering a service to the employer, just like all other workers.
Read: President Ruto housing levy set at 3 percent of basic pay
The Association of Pension Trustees and Administrators of Kenya had sought clarity on board members paying he housing levy.
