Frozen tax breaks to hurt home ownership saving plans
Wednesday, January 6th, 2021
CONSTRUCTION: Kenyans saving to build homes will find that goal harder to attain after the government took away tax breaks on savings towards housing.
Already, Cytonn Investments has announced closure of its Cytonn Affordable Housing Incentive Plan (CAHIP) facility, soon after the government took away tax breaks for housing.
“The tax incentives extended to home ownership savings plan through the Income Tax Act have since been scrapped effective January 2021 and as such we shall be closing the CAHIP account which was incorporated in line with these incentives,” Cytonn said in a statement.
Removal of tax breaks
Home ownership savings plan (HOSP) was established targeting ‘approved institutions’ and those registered with the commissioner for Income Tax for receiving and holding funds in unit trusts for depositors.
The main objective was to aid in financing homebuyers and promote a culture of savings for aspiring homeowners through tax breaks on savings and interest on savings towards housing not exceeding Sh3 million.
“After the removal of the tax breaks in the Income Tax act 2020, it now means customers can now access this funds which is unlike before when this funds were not accessible,” said Beatrice Mwangi, an analyst at Cytonn Investment adding that it no longer makes business sense.
The tax exemption was available for savings not exceeding Sh8,000 a month.
This means Kenyans will struggle to build their homes as the government tightens tax measures across the board.
Treasury is pulling all stops to increase tax revenues due to difficult economic environment and the country’s rising debt profile.