How are pension withdrawals subject to individual income tax

How are pension withdrawals subject to individual income tax

The State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan in connection with the incoming appeals from citizens on the taxation of lump-sum pension payments told Kazakhstanis whether to worry about double taxation of pension payments.

Mandatory pension contributions withheld by agents (employers) from individuals are not subject to individual income tax (IIT), and the same procedure applies to mandatory professional pension contributions. Due to the fact that when you hold the amount of pension contributions are not subject to pit, the amount of pension savings are taxed when paying once, respectively, of double taxation does not occur, said the state revenue Committee of MF RK.

Also, the State Revenue Committee detailed the procedure for taxation of one-time pension payments in the second way. This method provides for the monthly retention of the PPI in equal shares for no more than 16 years according to the schedule established by the UAPF (from the next month in which the pension transfer is started).

For understanding, it is suggested to consider this option by an example.

Here is an example:

The amount of pension savings on the depositor's IPS = 8,500,000 tenge,

  • the sufficiency threshold = 3 500 000 tenge,

* one-time pension payment = 5,000,000 tenge (8,500,000 - 3,500,000),

  • amount of calculated PII = 5,000,000 (in full) * 10%= 500,000 tenge,
  • the amount of income in the form of a one-time pension payment = 5,000,000 tenge,

The PPI will be deducted from the pension as follows:

The amount of the calculated PPI is divided into 16 years, i.e. 192 months.

So, 500,000/ 192 = 2,604 tenge-the amount of deferred personal income tax will be deducted from the pension every month.

"If an individual decides to leave for permanent residence outside the Republic of Kazakhstan or transfer pension savings to an insurance company, the amount of the deferred PPI will be withheld in full by a one-time payment.

In case of death of individuals – deferred pit will be charged only inherited by heirs of pension savings of such individual," - added in the Press service of the SRC MF RK.