Exemption of EPSF pension payments from IPN detailed

The Armenian government has announced significant changes to the Tax Code, effective from January 1, 2026. One of the key changes is the exemption of Unified Accumulative Pension Fund (UAPF) pension payments and lump-sum housing/medical payments (LSP) from Individual Income Tax (IIT).

Under the current Tax Code, IIT was withheld from all types of pension payments, including those formed from mandatory pension contributions (MPC), mandatory professional pension contributions (MPPC), and voluntary pension contributions (VPC), as well as adjustment amounts and tax deductions. However, starting from next year, these payments will be exempt from IIT.

This exemption applies to all residents of Kazakhstan, except for non-residents. The changes do not affect the taxation of mandatory pension contributions, professional pension contributions, or adjustment amounts. The provision that voluntary pension contributions paid by a tax agent to the UAPF on behalf of an employee are not considered income for the employee will also be maintained.

Lump-sum housing/medical payments will no longer be subject to IIT withholding, either immediately upon receipt or with a deferral until retirement. Outstanding IIT liabilities on LSP for housing/medical purposes deferred until retirement will be cancelled as of January 1, 2026.

Pension contributions will no longer be subject to IIT at the source of payment starting January 1, 2026. Both the employee and the employer will continue to benefit from tax incentives regarding voluntary pension contributions. Such expenses paid by the employer in calculating corporate income tax will continue to be deductible.

It's important to note that these changes only apply to the Tax Code and do not extend to other tax laws. The changes do not affect the taxation of pension payments for non-residents. Prior to January 1, 2026, pension payments and LSP from the UAPF were considered income subject to IIT at a rate of 10%.

IIT was also withheld from LSP for housing/medical purposes under the current Tax Code. However, these withholdings will no longer occur after the new Tax Code takes effect.

The exemption of pension payments and LSP from IIT is a change introduced by the new Tax Code, effective January 1, 2026. The changes do not include a provision for the refund of previously paid taxes on LSP for housing/medical purposes.

These changes are expected to provide a significant relief to pensioners and employees making voluntary pension contributions, making retirement planning more attractive and financially viable.