Private pensions tax exemptions explained |07 August 2021
Private pension benefits will no longer be taxed under the Income and Non-Monetary Benefits, the Ministry of Finance, Economic Planning and Trade clarified yesterday.
Odile Vidot, director of financial sector policy in the ministry, yesterday at Liberty House, gave further clarifications on the decision which was approved by the Cabinet of ministers last week.
Private pensions refer to workplace pension funds or scheme set up by a company for its employees who may benefit from the pensions either on retirement or when they leave the company.
The private pensions are often used as an incentive for candidates to join a company.
Private pensions are separate from the pensions paid to and doled out by the Seychelles Pension Fund, and is either managed by the company or by a private third party specialised in pension funds.
“The amendments are solely for the private pensions and will have no impacts on the pension that is distributed by the Seychelles Pension Fund, whether it is the mandatory or voluntary pension,” explained Ms Vidot.
As it stands presently, private pensions are taxed progressively on the benefits that an employee goes home with as well as on the payments made by the employer.
Ms Vidot noted that the tax exemption on benefits will eliminate the double taxation on private pensions.
She added that double taxation on pensions also does not align with the government’s strategy to encourage people to save more.
Ms Vidot further explained that this is the first phase of the review of the Income and Non-Monetary Benefits Act in regards to pensions.
The finance department is working on the second phase of the review which will see a more comprehensive review of pension benefits.
During this review, the department is hoping to iron out certain term definitions and ensure that there is no loophole that could lead to abuse or fraud.
“The Cabinet also approved this second phase of the review wherein we will continue with the necessary consultations, collecting data and making amendments that will continue to promote the development of private pensions,” added Ms Vidot.
There are less than 10 private pensions established by companies in Seychelles and these tend to be large companies in the financial sector.
It is hoped that removing the double taxation element on private pensions will encourage more companies to venture into these pension schemes for their employees.
“Private pensions do not replace mandatory pension distributed by the Seychelles Pension Fund but it is a good supplement. This is the environment we hope to encourage and foster,” stated Ms Vidot.