The Social Health Authority (SHA) has issued a notice to employers providing clarification on SHIF contributions:
- Meaning of Gross Salary or Wage: Means income from salaried employment including basic salary and allowances paid to an employee on a regular (monthly) basis as a salary or wage. This means that one-off payments such as bonuses would not be subject to SHIF deductions.
- Whether SHIF contributions qualify for tax relief: SHA is of the view that SHIF contributions should qualify for insurance relief but advise employers to reach out to KRA for concurrence on this.
Under Section 31 (1)(c)(v) of the Income Tax Act, a health policy whose term commences on or after 1 January 2007 or a contribution made to the National Hospital Insurance Fund, qualify for insurance relief. It can be argued that SHIF, being a health insurance policy, should qualify for insurance relief despite not being specifically stated in the Income Tax Act. We wait to see a formal communication from KRA on this.
- Employer matching contributions: Employers are not required to match the SHIF contributions of their employees.
By Samuel Ngala- Partner Fiscus Consulting
