Income from pensions, etc
(1)
For the purposes of section 3(2)(c), a pension received by a
resident individual from a pension fund or pension scheme established outside
Kenya shall be deemed to have accrued in or to have been derived from Kenya
to the extent to which it relates to employment or services rendered by the
individual, or the husband* Spouse or parent of the individual, in Kenya and the amount
so derived shall be the proportion of the total pension which the length of the
employment or services in Kenya, including periods of leave earned thereby,
bears to the total length of employment or services in respect of which the
pension is paid. Amended by (FA 2025-wef 1st July-2025 S4*).
(2)
For the purposes of this Act, a pension or retirement annuity
received by a non-resident individual from a pension fund or pension scheme
established in Kenya or under an annuity contract made in Kenya shall be
deemed to have accrued in or to have been derived from Kenya.
(3)
For the purposes of this Act, a pension received in respect of
employment or by services rendered to the Community or one of its corporations
shall be deemed to have accrued in or to have been derived from Kenya -- (a) if received by a resident individual; or
- (b) if received by non-resident individual if the person making payment of the pension was resident in Kenya.
(4*)
(5*)
(b) in the case of a withdrawal from a registered pension registered pension or individual retirement fund upon termination of employment, the lesser of –
(ii) the first six hundred thousand shillings; Finance Act 2009 Effective 1 January 2010 or
(i) the lesser of the first six hundred thousand or the first sixty thousand shillings per full year of pensionable service with that employer starting on the later of the date the pensionable service began or, where the employee had previously received a lump sum payment from that same employer, the date the employee's pensionable service recommenced after receipt of that lump sum; and
(ii) where the registered fund receives no further contributions after 1990 year of income, or where the accumulated funds based on contributions prior to the 1st January 1991, and contributions after the 31st December, 1990 are segregated, all lump sum payments based on the contributions made prior to 1st January 1991, or in any other case, all benefits based on amounts accumulated in the fund on the 31st December 1990: Finance Act 2003 12 June 2003 Finance Act 2003 9 Jan 04 Finance Act 2009 Effective 1 January 2010
Provided that the trustees or provident fund managers shall have informed the Commissioner in writing by 31st December 1991 of the accumulated balances and the members of the provident funds as of 31st December 1990, the names of the registered funds, the names and addresses of such members, the name and address of their employer, and whether the registered provident fund has ceased receiving contributions as of 1st January 1991 or whether the registered provident fund has segregated its funds.
(d) in the case of a benefit paid out of the National Social Security Fund, the first six hundred thousand shillings; Finance Act 2009 Effective 1 January 2010 and
(e) in the case of a lump sum paid out of a registered home ownership savings plan, the amount used for the purchase of an interest in or for the construction of a permanent house for occupation by the depositor within twelve months immediately following the year of withdrawal.
(f) the total pensions and retirement annuities received by a resident individual from an unregistered pension fund or scheme:
(ii) and the income thereof has been taxed.
(5A)
For the purposes of subsection (5)(c)(ii), accumulated funds are
segregated where - - (a) the accumulated funds based on contributions prior to the 1st January 1991 are accounted for separately from contributions after 31st December 1990; and
- (b) the net accumulated funds on each account earn the average rate of return on all the assets in the fund at the accounting date for a year of income; and
- (c) the net accumulated funds based on contributions prior to 1st January 1991 are made up of the accumulated balances as at 31st December 1990 less any withdrawals from the fund plus any investment income earned on the fund up to the accounting date for a year of income.
(6*)
(b) where the registered fund provides for no payment of retirement benefits other than the payment of a lump sum to an estate, the first one million four hundred thousand shillings of such a lump sum payment shall be deemed to be income not chargeable to tax as income of the estate or its direct beneficiaries.
(7*)
(b) where funds are bequeathed to his children under the age of eighteen years at the time of his death, such funds shall be included in the income of such children;
(c) where the funds of a depositor under a registered home ownership savings plan are bequeathed to another depositor, the funds may be transferred to that depositor.
(8)
Upon dissolution of the marriage of the beneficiary of a registered
individual retirement fund or registered home ownership savings plan, as part of
a written agreement, all or part of the balance of funds of that beneficiary may be
transferred to a registered individual retirement fund or registered home
ownership savings plan in the name of the former spouse of that beneficiary.
(9*)
(9A*)
(10)
For the purpose of this section:- - (a) pension and lump sums paid from a public pension scheme, shall be deemed to be received from a registered pension fund or registered provident fund, as the case may be.
- (b) Any surplus funds in respect of a registered pension fund or a registered provident fund withdrawn by or refunded to an employer shall be deemed to be the income of that employer.
(11)
In subsection (10) the expression “surplus funds” means surplus
funds identified through an actuarial valuation carried out in accordance with
this Act or rules made thereunder.Previous Next
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