Kenya Court of Appeal Halts Housing Levy Contributions – What’s Next?

Introduction

On the 25th January 2024, the Court of Appeal at Nairobi has made a crucial decision regarding the deduction and collection of Housing Levy contributions, a matter that has significant implications for employees, employers, and tax authorities alike. This article aims to provide an overview of the recent events and their potential impact, all while emphasizing the importance of seeking professional advice in light of the legal uncertainties.

Disclaimer:

Before delving into the details, it is essential to recognize that the information presented herein is intended as general guidance and not a substitute for professional advice. Seal Associates, its directors, or associates cannot be held liable for any actions taken without seeking appropriate professional counsel.

Background:

The story begins with a ruling by the High Court of Kenya on November 28, 2023, which deemed certain sections of the Finance Act, 2023—specifically those introducing Housing Levy contributions—as unconstitutional. Despite this declaration, the High Court initially granted stay orders until January 10, 2024, subsequently extended to January 26, 2024.

Recent Developments:

However, the Court of Appeal at Nairobi has decided not to extend these orders further. In a recent ruling, the Court of Appeal declined to allow for the continued deduction and collection of Housing Levy contributions. The rationale behind this decision is rooted in the belief that public interest leans toward refraining from granting stay or conservatory orders while the substantive issues raised in Appeals no. E577, E581, E585, and E596 of 2023 are being heard.

The Appeals:

These appeals question the constitutional validity of the contested sections of the Finance Act, 2023. The Court of Appeal has recognized the appeals as having substantive merit and has directed an expeditious hearing and determination of the matters.

Impact:

As a direct consequence of the Court of Appeal’s decision, Housing Levy deductions on both employees and employers, currently set at the rate of 1.5% of gross pay, will be suspended until the Appeals are heard and determined. This decision has significant implications for affected parties, and it is crucial for individuals and businesses to stay informed about the ongoing legal proceedings.

Conclusion:

In conclusion, the legal landscape surrounding Housing Levy contributions is evolving, with recent court rulings shaping the future direction of this contentious issue. It is imperative for individuals and businesses to stay informed and, more importantly, to seek professional advice in navigating these legal complexities. The outcome of the Appeals will likely influence the way forward, and continued updates will be provided as events unfold.

Remember, when in doubt, consult with a professional to ensure that your decisions align with the latest legal developments and safeguard your interests in this dynamic environment.