Taxation of Pension withdrawals

  • July 30, 2024
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Taxation of Pension withdrawals

The first KES 60,000 lump sum withdrawals from both registered pension and provident funds for each year of pensionable service is tax exempt, subject to a maximum of KES 600,000.

Earnings from non-commuted pensions are exempt up to KES 300,000 per annum.

Lump sum payments and monthly pension payments to persons over 65 years of age are tax-free.

 Pension/provident fund withdrawals and lump sum payments beyond exempt limits are taxable. The same is subject to Withholding Tax as per the below table:

  1. a) Withdrawal before 15 years expiry
Rate
On the first Kshs. 288,000 10%
On the next Kshs. 100,000 25%
On all income over Kshs. 388,000 30

 

  1. b) Withdrawal after 15 years, upon attaining age of 50 years or retirement on health grounds
Rate
On the first KES 400,000 10%
The next KES 400,000 15%
The next KES 400,000 20%
On the next Kshs. 400,000 25%
Above KES 1,600,000 30%

 

NB: 1.0 WHT on pension is a final tax

        2.0 Withdrawals based on contributions made in 1991 and prior years are exempt.

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Taxation of Pension withdrawals



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