On the procedure for payment of individual income tax when withdrawing pension savings for the purpose of improving housing conditions and (or) paying for medical treatment

On the procedure for payment of individual income tax when withdrawing pension savings for the purpose of improving housing conditions and (or) paying for medical treatment

According to the Law on Pension Provision, a lump-sum pension benefit is the amount of pension savings formed from compulsory pension contributions and (or) compulsory occupational pension contributions, withdrawn by the contributor (beneficiary) from the UAPF in order to improve housing conditions and (or) pay for medical treatment.

Pension savings - money of the contributor (beneficiary), recorded in his individual pension saving account with the UAPF, including pension contributions, investment return, interest and other receipts.

Pension contributions are not subject to individual income tax (IIT) upon receipt on the contributor's individual pension saving account. Pension savings are tax deductible upon payment.

In order to determine the procedure for taxing the amounts of lump-sum pension benefits, the Tax Code has been supplemented with Article 351-1 Specifics of calculating, withholding and paying individual income tax from a lump-sum pension benefit in accordance with the legislation of the Republic of Kazakhstan on pension provision.

According to the Tax Code, the UAPF, as a tax agent, calculates the individual income tax when transferring a lump sum pension benefit calculated in accordance with the Law on Pension Provision to the bank account of the beneficiary and (or) an authorized operator. IIT is calculated by applying the rates established by Article 320 of the Tax Code (10%) to the amount of a one-time pension benefit.

The UAPF deducts and transfers the amount of the IIT to the state budget in accordance with paragraph 2 of Article 351-1 of the Tax Code in one of the following two ways, chosen by the contributor:

1) at a time, no later than the day of making a one-time pension benefit in the manner prescribed by Article 351 of the Tax Code;

2) monthly in equal shares for no more than sixteen years upon retirement (according to the schedule for pension benefits established by the UAPF).

The contributor's decision to choose the method of paying the individual income tax should be reflected in his application submitted to the authorized operator.

When a contributor submits an application for withholding the IIT at a time, the UAPF, when making a one-time pension benefit, will withhold the IIT immediately from the amount of the lump-sum pension benefit.

 

Example:

  • the amount of pension savings on the contributor's IPSA = 8,500,000 tenge
  • threshold of minimum sufficiency of pension savings = 3,500,000 tenge
  • the amount available for a one-time pension benefit = 8,500,000 - 3,500,000 = 5,000,000 tenge
  • accrued income in the form of a one-time pension benefit = 5,000,000 tenge
  • IIT amount to be withheld and transferred to the budget = 5,000,000 * 10% = 500,000 tenge
  • the amount of income in the form of a one-time pension payment, minus the withheld individual income tax at the source of payment = 5,000,000 - 500,000 = 4 500,000 tenge.

 

When a contributor submits an application for withholding the IIT on a monthly basis in equal shares, the UAPF will calculate the amount of the IIT without withholding and transferring to the state budget when making a lump-sum pension benefit. Withholding and transfer of the calculated IIT will be carried out when an individual reaches the retirement age in equal shares for no more than sixteen years according to the schedule for pension benefits established by the UAPF.

 

Example:

  • the amount of pension savings on the contributor's IRS = 8,500,000 tenge
  • threshold of minimum sufficiency of pension savings = 3,500,000 tenge
  • accrued income in the form of a one-time pension benefit = 5,000,000 tenge
  • the amount of the calculated individual income tax = 5,000,000 * 10% = 500,000 tenge
  • the amount of income in the form of a one-time pension benefit without withholding the IIT at the source of payment = 5,000,000 tenge.

 

If the contributor decides to choose the first method - to pay the IIT immediately in full, then he must indicate in the application the amount requested for withdrawal, minus the IIT in the amount of 10%. If the contributor decides to choose the second method - to take advantage of the deferred payment of the IIT, then he must indicate in the application the amount requested for withdrawal, without deducting the IIT.

Both amounts are already indicated in the statement provided by the UAPF to the contributor, for his convenience and independent choice. The amount specified by the contributor, requested for withdrawal, will be transferred from the UAPF to his special account opened with an authorized operator.