Attorney General Justin Muturi has asked the Kenya Revenue Authority not to deduct housing levy from the Kenyatta National Hospital board members.
Muturi argues that under Section 6(e) of the State Corporations Act, there is a deductible express legislative scheme not to categorise board members as employees.
"This scheme is in conformity with good governance principles of, interalia, separating the governance organ of the hospital, in this case being the board, and the management comprising of employees," he said.
Muturi added KRA had categorised board members as secondary employees which is not supported in law (the Employment Act) and is further alien to the reigning jurisprudence.
KNH had sought Muturi's interpretation of whether allowances payable to board members are subject to the affordable housing levy.
"Having considered the request in light of the background facts and the law, the central issue for consideration is whether in light of Section 31B of the Employment Act, as amended by the Finance Act, board members are liable to pay the Affordable Housing Levy," a letter dated September 22, 2023 read in part.
Muturi said that Under Section 31B of the Employment Act, the Affordable Housing Levy was meant to strictly apply to employers and employees.
He said that directors of KNH are not to be regarded as employees in order to fall within the remit of the application of the Affordable Housing Levy.
The AG added that the demand notice issued to KNH should be revised.
"Therefore, based on the aforementioned provisions of the law and decided cases, board members are not employees of state corporations," Muturi said.
"Consequently, KRA has no basis for expanding the scope of implementing the Affordable Housing Levy where the employer-employee relationship does not exist."
Muturi said that KNH was established as a state corporation in 1987 through Legal Notice No 109 of 6th April 1987 as amended by the KNH Amendment Order 2021 and falls within the scope of the State Corporations Act, 1986.
