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The Income Tax (Retirement Benefit) Rules, 1974

Legal Notice 318 of 1974

Repealed
This Legal Notice was repealed on 1993-01-01 by The Income Tax (Retirement Benefit) Rules, 1992.
This is the version of this Legal Notice as it was when it was repealed.
The Income Tax (Retirement Benefit) Rules, 1974
Citation
Legal Notice 318 of 1974
Primary work
Income Tax Act
Date
31 December 2022
Language
English
Type
Legal Notice
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LAWS OF KENYA

INCOME TAX ACT

THE INCOME TAX (RETIREMENT BENEFIT) RULES, 1974

LEGAL NOTICE 318 OF 1974

  • Commenced on 1 January 1974
  1. [Amended by Income Tax (Retirement Benefit) (Amendment) Rules, 1980 (Legal Notice 50 of 1980) on 18 April 1980]
  2. [Amended by Income Tax (Retirement Benefit) (Amendment) Rules, 1991 (Legal Notice 239 of 1991) on 13 June 1991]
  3. [Amended by Income Tax (Retirement Benefit) (Amendment) (No. 2) Rules, 1991 (Legal Notice 468 of 1991) on 20 September 1991]
  4. [Revised by 24th Annual Supplement (Legal Notice 221 of 2023) on 31 December 2022]
  5. [Revoked by The Income Tax (Retirement Benefit) Rules, 1992 (Legal Notice 136 of 1992) on 1 January 1993]
Citation and Commencement/1. These Rules may be cited as the Income Tax (Retirement Benefit) Rules, 1992, and shall come into operation on the 1st January, 1993, except the provisionsunder paragraphs 4(n), (o), (p) and (q) and 5(k), (1), (m) and (n), which shall come into operation on the 5th June 1992.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, a pension scheme, an individual retirement fund, a provident fund or trust fund.Existing Scheme3. Subject to these Rules, a pension fund, pension schemes or provident fund which was establ)shed in Kenya and approved for the purposes of the Management Act or a trustscheme or annuity contract approved for the purposes of the Management Act, shall be deemed respectively to be a registered pension fund, registered pension scheme, registeredprovident fund, registered trust scheme and registered annuity contract for the purposes of the Act.Registration of pension funds4. 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 issatisfied that it-
(a)is established in Kenya under an irrevocable trust;
and
(b)is established by or on behalf of an employer with the principal object of providing for his employees on retirement from his service or for their dependants on the death of those employees, pensions or similar periodical benefits related to their service with him; and
(c)provides that all moneys payable thereunder shall be paid in Kenya; and
(d)provides that no money payable thereunder shall be paid or payable to an employee while in the service of the employer; and
(e)provides that no benefits or contributions accruing or payable thereunder shall be capable of assignment; and
(f)provides that no payment thereunder shall be made to the employer without the written consent of the Commissioner; and
(g)provides that in respect of any one employee, the aggregate of contributions for a year of income by the employee to registered pension and registered provident funds and by the employer on behalf of the employee under the defined contribution provisions of a registered fund shall together not exceed thirty per cent of the employee's pensionable income for that year of income or four thousand five hundred pounds (or, where contributions are made in respect of a part year of service by the employee, three
hundred and seventy-five pounds per month), whichever is less; and
(h)provides that in respect of all employees who are members of a defined benefit registered fund, the aggregate of contributions by the employer under defined benefit provisions of registered funds for a year of income in respect of these employees shall together not exceed thirty per cent of all such employees' pensionable income for that year of
income or four thousand five hundred pounds times the number of full-year members of the defined benefit registered funds of the employer, whichever is less, reduced by the aggregate contributions in respect of such members of defined benefit registered funds allowed under subparagraph (g); and
(i)provides that, not more than eighteen thousand pounds of the pension may be payable by way of commutation; and
(j)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 sums on the death of an employee except a lump sum payable to the estate, or a lump sum or an annuity or both whether directly or indirectly payable to the widow or widower or dependants, of that employee; and
(1)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
(m)provides that no loan or other benefit shall be provided out of the fund to the employee or any person not dealing at arm's length with that employee; and
(n)provides that any employee who is in a category for which the employer has established the pension fund shall be eligible for membership after a maximum of two years of service with that employer, except that where the fund is noncontributory, membership shall be automatic after the period required for eligibility has been attained; provided that where pension fund was registered prior to 5th June, 1992, the fund must comply with this condition by 1998; and
(o)provides that all benefits derived from contributions made by an employee shall vest immediately in the employee; and
(p)provides that retirement benefits accrued from membership shall be fully vested in an employee after a maximum of five years of pensionable service; provided that where the pension fund was registered prior to 5th June, 1992, the fund must comply with this condition by 1998; and
(q)provides that the periods of service of an employee for purposes of subparagraphs (n) and (q) shall be determined without regard to temporary interruptions of employment for periods of nine months or less.
Registration of provident funds5. 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 established in Kenya under an irrevocable trust; and
(b)is established by or on behalf of an employer with the principal object of providing for the payment of lump sums to his employees in respect of their service with him upon their leaving that service after a specified period thereof, or to any of the dependants, or to the estate, of any of those employees on their death while in that service; and
(c)provides that all sums payable thereunder shall be paid in Kenya; and
(d)provides that no money payable thereunder shall be paid or payable to an employee while in the service of the employer; and
(e)provides that no benefit or contribution accruing or payable thereunder shall be capable of assignment; and
(f)provides that no payment thereunder shall be made to the employer without the written consent of the Commissioner; and
(g)provides that in respect of any one employee, the aggregate of contributions for a year of income, by the employee to registered pension and registered provident funds and by the employer on behalf of the employee under the defined contribution provisions of a registed fund shall together not exceed thirty per cent of the employee's pensionable income for that
year of income or four thousand five hundred pounds (or, where contributions are made in respect of part year of service by the employee, three hundred and seventy-five pounds per month) whichever is less; and
(h)provides that in respect of all employees who are members of a defined benefit registered fund, the aggregate of contributions by the employer under defined benefit provisions of registered funds for a year of income in respect of these employees shall together not exceed thirty per cent of all such employees' pensionable income for that year of
income or four thousand five hundred pounds times the number of full-year members of the defined benefit registered funds of the employer, whichever is less, reduced by the aggregate contributions in respect of such members of defined benefit registered funds allowed under subparagraph (g); and
(i)provides that-
(i)the maximum amount payable to an employee in respect of the employer's contribution shall not exceed thirty six thousand pounds plus interest accrued thereon in the fund; or
(ii)where the employee participates in more
than one registered provident fund established by the employer, the limit of thirty six thousand pounds plus interest shall apply to the total amounts so payable from all those funds; and
(iii)the fund shall consist only of contributions by the employer in respect of his employees, and contributions by those employees, together with interest thereon,
and securities purchased out of the fund together with the interest paid on those securities; and
(iv)in the case of an employee who was a member of a registered provident fund prior to 7th June, 1990, the lump sum under subparagraphs (i) and (ii) may be paid after
the completion of the specified period of service; or
(v)if the employee became a member of a registered provident fund after 7th June, 1990, the lump sum under subparagraphs (i) and (ii) 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 defered basis upon the employee reaching the age of fifty years;
(vi)notwithstanding that conditions set in sub-paragraphs (iv) and (v) have not been satisfied, a contributing employee who is a member of a registered provident fund may receive the full amounts payable under subparagraphs (i) and (ii) after reaching 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; and
(j)provides that no loan or other benefit shall be provided out of the fund to the employee or any person not dealing at arm's length with that employee; and
(k)provides that any employee who is in a category for which the employer has established provident fund shall be eligible for membership after a maximum of two years of service with that employer, except that where the fund is noncontributory, membership shall be automatic after the period required for eligibility has been attained; provided that where the provident fund was established prior to 5th June, 1992, the fund must comply with this condition by 1998; and
(1)provides that all benefits derived from contributions made by an employee shall vest immediately in the employee; and
(m)provides that retirement benefits accrued from membership shall be fully vested in an employee after a maximum of five years of pensionable service; provided that where the provident fund was registered prior to 5th June, 1992, the fund must comply with this condition by 1998; and
(n)provides that the periods of service of an employee for purposes of subparagraphs (k) and (m) shall be determined without regard to temporary interruptions of employment for periods of nine months or less.
Registration of individual retirement funds/6. An individual retirement fund shall, upon application made under rule 8, be registered by the Commissioner for the purposes of this Act if he is satisfiedthat it-
(a)is established in Kenya under an irrevocable trust; and
(b)is established by a qualified institution with the principal objects of reviving and investing 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
(c)provides that all sums payable thereunder shall be paid in Kenya; and
(d)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
(e)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
(f)provides that no loan or other benefit shall be provided out of the fund to the beneficiary or any person not dealing at arm's length with that beneficiary; and
(h)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
(i)provides that the beneficiary may withdraw all or part of the balance of the funds at any time without unreasonable delay; and
(j)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
(k)provides that upcin the death of the beneficiary the funds shall be distributed or transferred as legally required; and
(1)provides that all benefits derived from contributions by or on behalf of an individual shall vest in that individual immediately.Discretionary registration7. 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 complywith every requirement of rule 4, 5 or 6 but which in his opinion substantially so complies.Registration procedure8. (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 twocopies 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 therefor, 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 regulations to be notified9. 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 registration10. (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 fulfil 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 it was approved under the Management Act except where those conditions have been varied by these Rules; or
(f)a scheme the accounts of which fail or cease to be maintained to the satisfaction of the Commissioner.
(2)A withdrawal of registration under this rule shall take effect from the beginning of the year of income in which the grounds for that withdrawal arose or such later date as the Commissioner may determine.Revocation11. The Income Tax (Retirement Benefit) Rules are revoked.
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History of this document

31 December 2022 this version
01 January 1993
20 September 1991
13 June 1991
18 April 1980
01 January 1974
Commenced