THE INCOME TAX (RETIREMENT BENEFIT) (Amendment) Rules, 2008
LN 318/1974 LN 79/2008 LN 124 LN32/1988Citation
1. These Rules may be cited as the Income Tax (Retirement Benefits) Rules, 1994 and shall come into operation on 17th June, 1994.Interpretation
2.(1) In these Rules, unless the context otherwise requires -"employee" means an employee participating in a registered scheme;
"employer" means a person carrying on a business wholly or partly in Kenya in connection with which a scheme is established;
"pension" includes a pension from employment and a retirement annuity;
"scheme regulations" means the regulations specifically governing the constitution and administration of a particular scheme;
"trustee" includes a person having the management or control of a fund or scheme.
(2) For the purposes of this rule and rules 8 and 9, "scheme" means a pension fund, pension scheme, an individual retirement fund, a provident fund or trust fund.
Existing Schemes.
3. Subject to these Rules, a pension fund, pension scheme or provident fund which was established in Kenya and approved for the purposes of the Management Act, or a trust scheme or annuity contract approved for the purposes of the Management Act, shall be deemed respectively to be a registered pension fund, registered pension scheme, registered provident fund, registered trust scheme and registered annuity contract for the purposes of the Act.Registration of Pensions funds.
4. A pension fund to which rule 3 does not apply shall, upon application being made under rule 8, be registered by the Commissioner for the purposes of the Act if he is satisfied that it -(a) is registered with the Retirement Benefits Authority
(b) Deleted
(c) Provides that all moneys payable thereunder shall be paid in Kenya; and
(d) Deleted Finance Act 2005 LN 52 8 June 2005
(e) Provided that, in the case of a defined pension fund, where a surplus is identified in the actuarial report under subparagraph (j)(ii)
- (i) Such surplus shall be allocated to the respective accounts of the members of the fund; or
- (ii) The contribution made by the employer in the year shall be reduced by the amount by which the surplus exceeds the average contribution made by the employer over the previous three years.
(g) Provided that in the case of a defined contribution pension fund where a surplus is identified by the audit required under subparagraph (j)(i), such surplus shall be allocated to the respective accounts of the members of the fund in lieu of new contributions by the employer in the year and subsequent years until the surplus is exhausted and such allocation of surplus shall be deemed to be contributions by the employer; and”
Effective 12 June 2008
(h) (Deleted by LN 79 of 2008)
- (i) Provides that the payment of pension shall not commence (i) until the retirement of the employee from service with the employer on or after the employee attains the age of fifty years; or
- (ii) Except upon earlier retirement on account of infirmity of mind or body; and
(k) does not provide for the payment of an annuity, to the widow or widower of an employee, other than annuity for a term certain or during the life of that widow or widower or during the minority of a dependant of that employee; and
(l) Deleted
(m) Deleted
(n) Provides that all benefits derived from contributions made by an employee shall vest immediately in the employee; and
(o) Deleted
(p) Deleted
(q) Provides that -
Finance Act 2004 LN No. 55 L.N 197/1994 10 June 2004 w.e.f 1 Jan 2005
- (i) in the case of a defined contribution pension fund, an audit shall be carried out at once every year during which all assets shall be valued at their current market prices and all surplus funds not allocated to the account of a member of the fund identified:
- Provided that, where the fund makes provision for a reserve fund, the amount of this reserve fund that does not exceed ten percent of the market value of the assets may be excluded from the surplus funds not allocated to the account of a member of the fund.
- (ii) in the case of a defined benefit pension fund, an actuarial investigation shall be carried out by an actuary at least once every three years beginning from 1st January, 1995 during which any actuarial deficiency or surplus in the fund shall be determined;
- (iii) the audited accounts or the actuarial report as the case may be, shall be sent to the Commissioner of Income Tax, the Commissioner of Insurance and all members of the fund shall be notified of the availability of the audited accounts or actuarial report for scrutiny at the offices of the fund manager not later than thirty days from the date of the completion of the audit, or report; and
- (iv) any surplus funds identified shall appropriately be allocated to the respective accounts of the members, and upon the fund being wound up, the surplus funds shall be deemed to be the funds of the employer, unless the trust deed of such scheme specifies otherwise, and shall be required to be withdrawn and charged to tax in the hands of the employer.
Registration of Provident funds
5. A provident fund to which rule 3 does not apply shall upon application being made under rule 8, be registered by the Commissioner for the purposes of the Act if he is satisfied that it -(a) Is registered with the Retirement Benefits Authority
(b) Deleted
(c) provided that all sums payable thereunder shall be paid in Kenya; and
(d) provided that no payment thereunder shall be made to the employer without the written consent of the Commissioner; and
(e) provided that in the case of a provident fund where a surplus is identified by the audit required under subparagraph (g)(i), such surplus shall be allocated to the accounts of the members of the fund in lieu of contributions by the employer in the year and each subsequent year until the surplus is exhausted and such allocation of surplus shall be deemed to be contributions by the employer
- Application: Provided that in the case of a provident fund where a surplus is identified by the audit required under subparagraph (o)(i), such surplus shall be allocated to the account of members of the fund in lieu of contributions by the employer in the year and each subsequent year until the surplus is exhausted and such allocation of surplus shall be deemed to be contributions by the employer;
- (i) the fund shall consist only of contributions by the employer in respect of his employees, and contributions by those employees, together with interest and other accrued income thereon, and securities purchased out of the fund together with the interest paid on those securities;
- (ii) in the case of an employee who was a member of a registered provident fund prior to 7 June 1990, the lump sum may be paid after the completion of the specified period of the service
- (iii) if the employee became a member of a registered provident fund after 7 June 1990 the lump sum shall apply only if the period of service with that employer is not less than five years except that the lump sum may be paid on deferred basis upon the employee attaining the age of fifty years; and
- (iv) Notwithstanding that the conditions set in subparagraphs (ii) and (iii) have not been satisfied, a contributing employee who is a member of a registered provident fund may receive the full amounts payable after attaining the age of fifty-five years or such earlier age as the Commissioner may permit but not before he attains the age of forty years.
(g) Provides that all benefits derived from contributions made
by an employee shall vest immediately in the employee;
and
(h) Provides that -
- (i) an audit shall be carried out once every year during which all assets shall be valued at their market prices and all surplus funds not allocated to the account of a member of the fund identified
- Finance Act 2005 L.N 52. 8 June 05 Proviso deleted.
- (ii) the audited accounts shall be sent to the Commissioner of income Tax, the Commissioner of Insurance, and all members of the fund notified of its availability for scrutiny at the offices of the fund manager, not later than thirty days from the date of completion of the audit.
(i) Provides that, in the case of a provident fund that
maintains a reserve fund, a beneficiary shall receive a share
of the reserve fund upon being awarded benefits in respect
of retirement, disability or death, as the case may be, in
proportion to the value that the funds allocated to the
account of the beneficiary bears to the value of the funds
allocated to the accounts of all beneficiaries of the fund at
that time.
Registration of individual
6. An individual retirement fund shall, upon application being made under
rule 8, be registered by the Commissioner for the purposes retirement
funds of this Act if he is satisfied that it -
(a) is established in Kenya under an irrevocable trust; and
(b) is established by a qualified institution with the principal
objects of receiving fund and investing such funds in
qualifying assets on behalf of an individual
(c) is established by a qualified institution with the principal
objects of receiving fund and investing such funds in
qualifying assets on behalf of an individual beneficiary in
order to provide pension benefits for such an individual, or
the surviving dependants or estate upon the death of such
an individual; and
(d) Provides that all sums payable thereunder shall be paid in
Kenya; and
(e) Provides that no benefit or contribution accruing or payable
thereunder shall be capable of assignment and shall not be
pledged as security on a loan; and
(f) Provides that the only contributions received shall be –
- (i) Funds transferred from another registered fund or registered individual retirement fund under section 22A(5) of the Act where the Commissioner has been duly informed of the transfer of funds; or
- (ii) Contributions by or on behalf of an individual who qualifies for a deduction under section 22B of the Act; and
(g) Provides that the payment of pension shall not commence
until retirement after the attainment of the age of fifty
years or upon earlier retirement on the grounds of ill health
or infirmity of body or mind or on leaving the country
permanently;
(h) Deleted
(i) Provides that an individual beneficiary can direct that all
funds in his individual retirement fund be transferred to
another such account with the same or another qualified
institution without unreasonable delay and with
notification of the Commissioner; and
(j) Provides that the beneficiary may withdraw all or part of
the balance of the funds at any time without unreasonable
delay; and
(k) Provides that in every year starting in the year following the
year in which the beneficiary attains sixty years of age, at
least ten per cent of the balance of the funds at the
beginning of the year shall be withdrawn and paid to the
beneficiary; and(l) Provides that upon the death of the beneficiary the funds shall be distributed or Transferred as legally required; and
(m) Provides that all benefits derived from contributions by or on behalf of an individual shall vest in that individual immediately.
Discretionary Registration
7. The Commissioner may, subject to such conditions as he thinks fit, register, for the purposes of the Act, another pension fund or provident fund which does not fully comply with every requirement of the rule 4. 5 or 6 but which in his opinion substantially complies.Registration Procedure
8. (1) Application for the registration of a scheme under rule 4, 5, 6 or 7 shall be made by the trustee of the scheme to the Commissioner in writing accompanied by two copies of the trust deed or other documents constituting the scheme and the scheme regulations.(2) The Commissioner shall, as soon as practicable after
considering the application, notify the trustee in writing whether the scheme is acceptable for registration. And the same notification shall specify either -
- (a) the reason therefore, 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 so acceptable.
Alteration of scheme regulation to be notified
9. Where an alteration is made to scheme regulations, the trustee of the scheme shall immediately inform the Commissioner in writing thereof and such alteration shall not be effective unless written approval is received from the Commissioner.Withdrawal of registration
10. (1) The Commissioner may at any time, by notice in writing to the trustee of a scheme, withdraw the registration of -- (a) a registered pension fund (whether registered under rule 3 or rule 4) the scheme regulations whereof have been so altered or breached that he is satisfied on reasonable grounds that the scheme no longer meets the requirements of rule 4: or
- (b) a registered provident fund (whether registered under rule 3 or rule 5) the scheme regulations whereof have been so altered or breached that he is satisfied on reasonable grounds that the scheme no longer meets the requirements of rule 5; or
- (c) a registered individual retirement fund the scheme regulations whereof have been so altered or breached that he is satisfied on reasonable grounds that the scheme no longer meets the requirements of rule 6; or
- (d) a scheme registered under rule 7 which he is satisfied on reasonable grounds no longer meets the requirements of that rule or which has failed or ceased to fulfill any conditions of registration imposed under that rule; or
- (e) a registered pension scheme or registered trust scheme the scheme regulations whereof have been so altered or breached that he is satisfied on reasonable grounds that the scheme no longer fulfills the conditions under which ft was approved under the Management Act except where those conditions have been varied by these Rules; or a scheme the accounts of which fail or cease to be maintained to the satisfaction of the Commissioner
Comments