Housing Principal Secretary Charles Hinga on Monday, May 29, revealed that Kenyans would be taxed when they withdraw their contribution from the Housing Fund after seven years.
In an interview on a local media station, Hinga explained that the withdrawal would be taxed since the initial 3 per cent contribution will not be taxed during the salary deduction stage.
He further noted that the tax was not a foreign idea citing taxation imposed on withdrawals from pensions.
"The money is a saving and was not taxed initially. If you could have earned the money, you would have paid tax. That means for the seven years, you did not pay the tax.
"This money is aimed at addressing the issue of housing and unemployment," he expounded.
However, he noted that the contributors could also transfer their seven-year contributions to pension schemes of their choice if they did not want the money to be taxed.
"What we are saying is that you can take the money and move it to the retirement fund. That will not be taxed," he added.
On whether Kenyans would also get the other 3 per cent topped up by their employers, Hinga revealed that their contributions would still stay in the fund for longer.
"In the draft regulations, it stipulates that Kenyans will get the 3 per cent they contribute. However, the employers pay for the other three per cent, which will remain in the Housing Fund for 14 years," Hinga noted.
He maintained that the Housing Fund was a saving and not a tax adding that the funds would help the government address the housing shortage in the country.
On the other hand, he divulged that only Kenyans who contribute to the Housing Fund would own houses under the programme.
Per the proposals, employed Kenyans will pay 3 per cent of their salaries, with their employers topping up a similar amount.
Kenyans in the informal sector also have a leeway to contribute to the Housing Fund.
The maximum contribution for all Kenyans is capped at a maximum of Ksh2,500.
During an earlier interview, the PS revealed that the government would collect an average of Ksh9 billion monthly.