The Kenya Revenue Authority (KRA) is currently pursuing principals and Headteachers who have failed to transmit 1.5% of the monthly gross income of their Board of Management (BOM) teachers and support staff towards the Housing fund.
Many public schools rely on BOM teachers to supplement the workload of TSC teachers. The institutions also employ staff such as watchmen, cooks, librarians, bursars, among others who help in non teaching roles.
The taxman is now insisting that school heads, both in primary and secondary schools, should ensure a 1.5% housing levy deduction from the gross income of teachers and support staff each month.
KRA is also urging those who have not paid the levy to have their salaries withheld to cover the arrears from July to October.
One of the notices issued by KRA specifies the demand for a 1.5% deduction from the gross income of secondary school BOM employees and employers, effective from July 1, 2023.
“The levy will be deducted by employers from employees gross salary and be remtted to Kenya Revenue Authority together with the employers contribution,” stated a notice addressed to secondary school heads in Vihiga and Kakamega counties by the KRA Department for Domestic Taxes.
Since the enactment of the Finance Act, all employees are obligated to contribute 1.5% of their gross income towards the housing fund, with employers also required to remit the same percentage to support their employees.
This implies that starting in January, when schools reopen, there may be changes for this category of employees, most of whom are paid without formal payslips.
Schools find themselves compelled to deduct and remit the funds to KRA. However, a potential challenge lies in ensuring that schools (employers) remit the correct amount to KRA, as mandated.
The tax authority has cautioned about potential consequences if school heads persist in paying their staff without deducting and remitting the housing tax.
Currently, it is difficult to enforce compliance for those paying cash allowances to staff like weekly remedial funds as some institutions will heavily rely on paying cash to avoid the compliance process which will come at a cost.