THE INCOME TAX (REGISTERED HOME OWNERSHIP SAVINGS PLAN) (Amendment) RULES, 1995
Legal Notice No. 82
14 June 2007
Citation and Commencement.
1. These Rules may be cited as the Income Tax (Home Ownership Savings Plan) (Amendment) Rules, 2007.Interpretation.
2. In these Rules, unless the context otherwise requires-"institution" means an approved institution operating a home ownership savings plan registered in accordance with these Rules;
"Plan" means a home ownership savings plan;
"qualifying deposits" means -
(i) funds transferred from another Plan under Section 22C of the Act; or,
(ii) any deposits which qualify for a deduction under section 22C of the Act.
Application for Registration.
3.(1) An approved institution offering a home ownership savings plan to depositors may apply to the Commissioner for registration of the Plan for the purposes of the Act.(2) An application under this rules shall -
- (a) be made in writing addressed to the Commissioner;
- (b) be signed by two of the officials of the approved institution;
- (c) be accompanied by two certified copies of either the trust deed, or any rules or other document consisting of the plan.
Requirements for Registration.
4. The Commissioner may, on receipt of an application under rule 3, register a Plan if-(a) it is established in Kenya under an irrevocable trust;
(b) the trust deed, rules or other document constituting the Plan provide that -
- (i) all sums held on account of a depositor shall be used to purchase or construct a permanent house in Kenya;
- (ii) no deposit made or benefit accruing or payable to the depositor shall be pledged as security for a loan or shall be capable of assignment unless the depositor dies;
- (iii) upon the death of the depositor, the balance of the funds in his account shall be transferred to his spouse, any of his children who have attained the age of eighteen years or any relative of the depositor who is a qualifying individual without closing the account;
- (iv) only qualifying deposits may be made by a depositor under the Plan;
- (v)Legal Notice No. 82 14 June 2007
the deposits shall only be invested in qualifying assets;DELETED - (vi) no loan or other benefit shall be provided out of the account to the depositor or to any person not dealing at arm's length with the depositor;
- (vii) a depositor may, subject to the approval of the Commissioner, direct that all funds held in his account be transferred to another institution operating a similar Plan without undue delay;
- (viii) the depositor may at any time on or before the ninth year after the qualifying year withdraw all the sums deposited without deduction of tax to purchase or construct a permanent house for his occupation:
- Provided that any excess amount of the withdrawal not used for the purchase or construction of the house shall be subject to tax;
- (ix) in every year starting with the qualifying year up to the tenth year the depositor shall make in his account an annual deposit of up to thirty thousand shillings;
- (x) upon the death of the depositor, any funds held in his account shall be transferred as provided in these Rules and any sums not applied towards the purchase or construction of a permanent house shall be subject to tax;
- (xi) in the case of expenditure on an existing house, no distinction shall be made between the value of the existing building and the land on which its stands;
- (xii) in the case of the construction of a house, qualifying expenditure shall consist of construction services and building material supported by such evidence as the Commissioner may require;
- (xiii) all funds in a depositor's account shall be withdrawn as a lump sum by the end of the ninth year following the qualifying year.
Notification of registration
5. The Commissioner shall, as soon as reasonably practicable after considering the application, notify the applicant in writing whether or not the Plan is acceptable for registration, and the same notification shall specify either –- (a) the reason therefor, if it is not acceptable; or
- (b) the year of income in respect of which the registration is first to take effect, if it is acceptable.
Supply of information to the Commissioner
6. An institution shall, in respect of every depositor saving under a Plan, forward to the Commissioner -- (a) the personal identification number of the depositor;
- (b) a certified copy of an affidavit sworn by the depositor confirming that he does not directly or indirectly own and has not previously directly or indirectly owned any interest in a permanent house;
- (c) the amount of deposits; mode of investment and any withdrawal thereof;
- (d) such other information as the Commissioner may from time to time require.
Alteration of Trust Deed, Rules, etc.
7. Where an alteration is made to the trust deed, the rules or other document constituting the Plan, the institution shall forthwith notify the Commissioner in writing and such alteration shall not be effective unless written approval thereof is received from the Commissioner.8. (1). The Commissioner may, by notice in writing to the institution, withdraw the registration of a Plan if –
- (a) the provisions of the trust deed, the rules or other documents constituting the Plan have either been breached or so altered that the Plan no longer meets the requirements of the Act or these Rules; or
- (b) the accounts of the Plan fail or cease to be maintained to the satisfaction of the Commissioner.