Senior citizens below the age of 65 years could soon be getting their pensions tax free.
The proposal by the treasury if passed into law will hand relief to those eyeing early retirement but presenting a headache for pension administrators.
“During the strategy period, pension tax structure will be reviewed from exempt-exempt-tax to exempt-exempt-exempt to make withdrawals exempt irrespective of the taxpayer’s age,” it said in its revenue plan.
Currently those between 50 and 65 years enjoy tax free withdrawals up to Sh600,000 and 10 to 25 percent in the next Sh1.6m
For those tapping into their pension before turning 5 0, the first Sh600,000 is for free while Sh466,704 is taxed at between 10 percent and 25 percent, leaving the balance to be taxed at 30 percent.
This will mark a departure from the current exempt-exempt-tax where pension contributions and investment incomes are exempted from tax but withdrawals are subjected to a graduated tax structure depending on the age of the contributor.
“This structure is discriminatory since pension withdrawals after attaining the age of 65 years are exempt while those below the age of 65 years are taxable,” the Treasury said.