Effective January 1, 2026, according to the new Tax Code, income in the form of pension benefits and lump sum pension benefit payments for housing/medical expenses (LSPBP) from the UAPF is exempt from individual income tax (IIT), with the exception of pension benefits made to non-residents of the Republic of Kazakhstan.

How was it?

Previously, all pension benefits, including LSPBP from the UAPF, were considered income subject to IIT at a 10% withholding rate. Pension contributions were transferred to individual pension savings accounts before tax, and IIT was withheld upon payment. Adjustments and tax deductions were taken into account.

When using lump sum pension benefit payments for housing/medical expenses, IIT was also withheld. There were two options for withholding: immediately upon receipt of the LSPBP or deferred until scheduled payments were made.

How will this be implemented starting January 1, 2026?

IIT is not withheld from all types of pension benefits, except in cases where the beneficiary is a non-resident of the Republic of Kazakhstan, and will not be withheld from the LSPBP.

The changes also include the cancellation of accrued IIT obligations from the LSPBP for housing/medical expenses deferred until retirement, effective January 1, 2026, but do not provide for a refund of previously paid taxes.

Individuals belonging to socially vulnerable groups are entitled to tax deductions up to 882 times the monthly calculated indicator in effect as of January 1 of the relevant financial year for taxable income in the form of lump-sum pension benefit payments. These include individuals with disabilities of the first, second, or third groups; one parent or guardian of a child with a disability; one adoptive parent or foster parent of orphans; combat veterans; and other categories. A full list of eligible individuals is available in Article 404 of the Tax Code of the Republic of Kazakhstan. If recipients in this category paid the IIT immediately when using the LSPBP, they can submit a corresponding application and supporting documents to the UAPF for recalculation and reimbursement of the IIT in accordance with the new Tax Code within three years from the date of receipt of the LSPBP. 

What else will change? 

The changes also include the abolition, effective January 1, 2026, of tax deductions on voluntary pension contributions made to one's own account, which are applied to income subject to withholding tax at source in the amounts established by the Tax Code.

However, the provision that voluntary pension contributions transferred by a tax agent to the UAPF for an employee are not considered personal income (and therefore not subject to IIT) remains in place, while such expenses are deductible for employers when calculating corporate income tax. This means that in this case, both the employee and the employer receive tax benefits.          

Source : https://www.gov.kz/memleket/entities/aqmola-selinograd/press/news/details/1139305?lang=kk