The building and construction industry in Kenya: Finance Bill is a crucial component of a country’s annual budgetary process. It outlines the Government’s plans for revenue generation, taxation, and fiscal policies.
Also Read: 2023 Finance Bill Proposal on NHDF, the way to go for Kenya’s affordable housing initiative?
Kenya’s Finance Bill 2023 has introduced a series of significant changes and reforms to the financial landscape of the country. In relation to the building and construction industry, the bill proposed about 3 amendments.
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Mandatory Contributions to National Housing Development Fund
In the 2023 Finance Bill, the government proposed an introduction of a new amendment in Section 31 of the Employment Act, 2007. This is the most eminent of the three amendments related to the building and construction industry in Kenya.
The Bill proposes to introduce mandatory contributions to the National Housing Development Fund. The contribution will be a 3% deduction on the basic monthly salaries of both public and private sector employees. Employers will also be required to match their employee’s contributions. However, the total contributions should not exceed Kshs 5,000 per month.
These monies will reportedly be used to facilitate the implementation of the affordable housing initiative in Kenya. They will also be used for purchasing homes for individuals eligible for the affordable housing scheme. After seven years or upon attaining the retirement age, whichever comes earlier, the ineligible may have the option of transferring their contributions.
The contributions can be transferred to a pension scheme or to persons eligible for affordable housing. These include their spouses and dependent children. The contribution may as well be received in cash, however, the cash withdrawals will be subject to taxation.
This proposal aligns with the Kenyan government’s commitment to providing affordable housing as part of its Big Four agenda.
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Introduction of industrial buildings and docks capital allowances
The 2023 Bill included a proposal for capital allowances for industrial buildings and docks.
As the name proposes this allowance will apply to the capital expenditure incurred by a person(s) on the construction of the facilities to be used by them or their lessee. It is claimed by the person that incurred the capital expenditure i.e., the owner of the building or the dock.
This amendment is meant to foster the development of the blue economy and stimulate economic growth. It will promote investment, especially in the transport, shipping, logistics and industrial sectors.
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Reversal of import declaration duty on imports for the construction of affordable houses
Import declaration duty is payable on all imports into the country under the miscellaneous fees and levies act, 2016 amendments.
Imports of raw materials, intermediate goods and inputs for the construction of houses under the approved affordable housing scheme have been subject to a reduced rate of 1.5%. This is about to come to an end though, as the bill seeks to delete this provision and reverts the IDF rate to 2.5%.
This will have an impact on manufacturers and participants in affordable housing construction as they will be burdened with additional importation costs.
