Mohammed Muigai LLP

More Diaries of a Legal Intern

Dear Diary,

It’s 5:30 AM, and I have to head to work. As I head to the shower, thoughts weigh on me due to the House Levy legal opinion that I knew I had to work on.

I ponder and reminisce the book I read during my first year, ‘Death and Taxes: The 18th Century Window Tax Re-visited’ by Robin Whalley. The book delved into the history of the window tax in the UK, which was abolished in 1851 after
remaining in effect for over 150 years. It was a property tax determined by the number of windows in a house. “I’m going to use this in my legal opinion.” I told myself, “The senior Associate (the associate) is going to be proud of me, when I’m done with this one.”

I’m a creature of habits. I put on my double-breasted grey suit and call an Uber. Twenty minutes later, I arrive at K-rep Centre, MM Chambers. As usual, I put on a warm smile while greeting the five guards.

Ding Dong (elevator rings), 4th Floor. I get off the elevator and the first thing that catches my attention is the name of two great Senior Counsels, Mohammed Muigai LLP.

I open the door, and the first person I see is the Janitor. I give him a smile and say, “Hello.”

I proceed to the library and pull up my seat. I take a seat and recall the associate’s words, “This library is a treasure trove of jurisprudence, housing the collective wisdom of centuries of legal minds.”

It’s 7:30 AM, and the phone rings. I pick it up and respond, “HELLO, GOODMORNING, PETER SPEAKING.” “GOOD MORNING, KIND SIR?” the associate inquires. “Where are we with the legal opinion?”

“I’ll send it within the next hour,” I respond calmly, and the associate hangs the phone.

Its 10 AM, and I’m still on the second page, struggling to understand the Housing Levy. Then, I remember an article written by one of my friends, which defined the housing levy as “a compulsory contribution done by an employer and employees toward home ownership, aiming to achieve affordable housing for Kenyan citizens.”

I stand and politely ask Tracy (a pupil), “What’s the origin of the Housing Levy?” She replies, “Just one minute, Peter. I have to finish these submissions.” After an hour, she apologizes and she clears her throat and explains, “The housing levy in Kenya was a tax system that was introduced in 2018 with the aim of addressing the country’s housing deficit. It was mandatory deduction from the
monthly salaries of all Kenyan employees, it was set at a rate of 1.5% of their earnings, on 16th April 2019 the levy was suspended by the ELRC COURT .”

Victor ( an intern) asks Tracy, “What is the difference between the 2018 Act and the recent 2023 Finance Act?”

“In the Finance Act of 2018, the combined contribution was capped at Kshs.5,000 per month. Additionally, Individuals who were not formally employed or non-citizens had the option to contribute a minimum of Kshs. 200 per month” “Fast forward to 2023, (she pauses for some seconds and continues) the Finance Act has established an uncapped levy at 1.5% of gross salary.”

“Additionally, in the 2018 Finance Act and the Income Tax Act, any Kenyan resident that was making the said contribution and applied for a house under the affordable housing scheme was entitled to a tax relief equal to 15% of the gross salary up to Kshs. 108,000 per annum. Therefore, when computing the tax payable by the contributor, the said relief was deducted from the gross tax computed hence lowering the tax liability of the contributor. However, in the Finance Act 2023, the Affordable Housing Relief provided for the Income Tax Act is yet to be aligned to the Affordable Housing Levy and therefore the Relief will not be applicable.”

“Kenyans are still debating and making contributions towards the housing levy and the low-cost housing program.” Tracy Concludes.

Brenda (pupil) looks at Tracy, impressed, as she listens to her music (_ Brenda usually listens to background music as she works_) while working on the Finance Act submissions for the Supreme Court petition. Brenda stops typing and shares an additional point, “The levy is payable by the employee and employer at a rate of 1.5% of the employee’s gross monthly salary by the employee, and 1.5% of the employee’s monthly gross salary by the employer, as outlined in the Finance Act 2023.” Little did she know she was helping me with my legal opinion.

I ask her, “What constitutes gross salary?” She looks at me and answers, “The Housing Levy is established under the Employment Act, not the Income Tax Act. Therefore, the definition should be based on the Employment Act and relevant case law. Whereas Section 2 of the Employment Act defines the term ‘basic salary’ as a gross salary less benefits and allowances, it does not define the term ‘gross salary.’ However, the definition of gross salary can be deduced from the definition of basic salary as being the sum of basic pay, benefits, and allowances. The Court of Appeal has upheld the same definition of the term ‘gross pay.’

“In essence, gross salary refers to all sums, benefits, and allowances due to an employee pertaining to employment services. Please note that gross pay does not include reimbursements for payments made on behalf of the employer.”

I pull my seat closer to my laptop and just stare at it, wondering how these colleagues have such extensive knowledge.

It’s 12 PM, and Ms. Adan (Associate) comes to the library, she looks at me with a sarcastic smile, “Peter, where are my Bill of Costs Submissions?”

I look down and then back up, responding, “I’m doing the final touches, and I’ll send the submissions in a few.” She walks away, understanding the immense pressure and workload we hold at the library.

I pull the file, set it aside, and write on my to-do list, “Write Ms. Adan’s submissions by 7 PM.”

Dan (a pupil) walks in; we call him “prof” in the Library because of his vast legal
knowledge. It’s really impressive how much he knows in this field.

I stop him while he walks towards his desk and ask him politely, “What are the key points of the Housing Levy?” He pushes his glasses up and stutters a bit before answering:

1. The Affordable Housing Levy is a mandatory contribution by all employees payable monthly at the rate of 1.5% of the employee’s gross monthly salary, matched by the employer at the same rate with no capping.
2. The levy is computed on the gross pay, which includes all cash and non-cash benefits advanced to the employee.
3. The Housing Levy cannot be reduced by the Affordable Housing Relief, but payments for houses purchased under the Affordable Housing Scheme will be allowable as a relief against income tax.
4. The levy will be collected by the Kenya Revenue Authority (KRA) and declared in the monthly Pay As You Earn (PAYE) return, paid together with PAYE.
5. The levy is due by the 9th day of the month following the deduction. Failure to comply with the provisions of the Affordable Housing Levy will result in a penalty of two percent of the unpaid amount for each month it remains unpaid.

I express my gratitude with a gentle smile, as he walks past me. It’s now 2 PM, and the Associate calls again. “Peter, please come!” I walk into the Engine Room, where some of my seniors sit. Brilliant minds right here!

“Where is my legal opinion, sir?” the Associate asks.

“Please give me one more hour, and I will send it,” I reply. Despite concealing his disappointment well, he couldn’t help but let out a laugh.

It’s 5 PM, and I type the last paragraph:

“We trust that you shall find this opinion useful and await your further instructions. However, should you have any further queries, please do not hesitate to contact us.” Before sending the legal opinion, I check LinkedIn, and a KRA public notice catches my
attention. “Kenya Revenue Authority (KRA) would like to inform the public that the Cabinet Secretary, Ministry of Lands, Public Works, Housing, and Urban Development has appointed KRA as the collecting agent of the Affordable Housing Levy (AHL) with
effect from 1st July 2023, 2023. All employers are now required to deduct the AHL from the employee’s gross salary and remit it, along with the employer’s contribution, as follows:

  • 1.5% of the employee’s gross monthly salary by the employee.
  • 1.5% of the employee’s monthly gross salary by the employer.”

I submit my legal opinion for review. It’s 6:30 PM, and I pack my brown bag, preparing to leave the office.

I head towards the elevator, Mr. Gabriel (partner in Dispute Resolution) holds the elevator for me as l rush towards it, he smiles warmly and asks, “How is your internship so far?”

I reply, “My internship at the law firm has been a valuable learning experience. (I pause for 5 seconds and continue). I am grateful for the opportunity to be part of such a dynamic and supportive environment.”

He smiles at me and says, “Welcome to MM.”

I get off the elevator on ground floor and walk towards my uber, as I recall some historical facts about the UK’s window tax. When it was introduced in 1696, it was faced with public protests, and many property owners found creative ways to avoid higher taxes. Some even bricked up their windows, resulting in buildings with fewer visible windows that still stand today.

As I ponder on this, a question arises in my mind: “What kind of response will the House levy face in Kenya?”

Legal Intern.

Peter is a fourth year law student at Jomo Kenyatta University of Agriculture and Technology.
He is currently working as a legal intern at the firm.