KRA Granted New Powers to Recover Over Sh100 Billion in Unpaid Housing Levy

The Kenya Revenue Authority (KRA) has been empowered to intensify efforts to recover unpaid housing levy arrears following amendments in the Finance Act, 2026. These changes grant KRA authority to treat unpaid housing levies as tax debts, enabling the use of established enforcement tools to secure outstanding amounts.

Background and Levy Scope

The Affordable Housing Act, 2024 mandates employers to deduct 1.5% of employees’ gross monthly salaries and contribute an equivalent 1.5%, totaling 3%. The levy also extends to informal-sector workers and self-employed individuals, who pay 1.5% of their gross income.

Initially introduced in July 2023 for formal employees only, the levy faced legal challenges for excluding informal workers. Parliament responded by expanding the contribution base, resuming collections in March 2024 under a more inclusive framework.

Limitations of Previous Enforcement

Before July 2026, KRA collected the levy but lacked explicit legal authority to recover unpaid amounts using tax recovery mechanisms. This gap limited the agency’s ability to enforce compliance effectively.

New Enforcement Powers

The Finance Act, 2026 introduced Section 39B to the Tax Procedures Act, empowering KRA’s Commissioner-General to recover unpaid levies as if they were unpaid taxes. The agency can now:

• Direct third parties, including banks and mobile money platforms, to remit funds owed by defaulters.
• Seize movable assets such as vehicles and office equipment for sale to cover debts.
• Freeze or safeguard transaction accounts to prevent asset dissipation.
• Place charges on immovable property like land to secure outstanding liabilities.

For debts under Sh100,000, KRA can pursue summary recovery without court proceedings, while larger amounts still require due legal process.

Implications for Employers and Workers

KRA will reconcile records to identify unpaid levies, including cases where employers deducted contributions from employees but failed to remit them. The agency’s enhanced powers mean employers face direct recovery actions, including asset seizures and account freezes, if they default.

Workers stand to benefit from improved enforcement, especially where deductions were made but funds not forwarded to the Affordable Housing Fund.

Incentives for KRA

The Finance Act also increased KRA’s potential allocation from the Affordable Housing Fund collections from 0.5% to up to 2%, subject to government approval. This is designed to incentivize more vigorous collection and recovery efforts.

Outlook

Housing Principal Secretary Charles Hinga acknowledged ongoing non-compliance by some employers but expressed optimism that the new legal framework would enhance recovery of overdue levies, supporting President William Ruto’s affordable housing agenda.