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SITZ employment regulation relating to tax treatment, overtime pay to be amended |31 December 2021

SITZ employment regulation relating to tax treatment, overtime pay to be amended

Mr Elizabeth (Photo: Dionne Renaud)

Seychelles International Trade Zone employment regulations are to be amended to ensure employees are exempted from paying taxes on overtime pay and that compensation is paid based on an approved formula, when an employee is terminated, resigns or retires from employment.

Cabinet recently approved proposed policy changes in relation to the tax treatment of compensation and overtime payments within the Seychelles International Trade Zone (SITZ). Consequentially, Cabinet approved proposals to amend the Income and Non-Monetary Benefit Tax Act and the International Trade Zone Employment Regulations.

Meeting with the press yesterday morning at Liberty House, Marcus Elizabeth, policy manager at the Financial Services Authority (FSA), gave more details on the proposed changes.

The SITZ employment regulation states that compensation is a salary or payment by an employer to an employee as per an established contract between the two parties and that a   compensation is only paid after a termination of employment.

Mr Elizabeth noted that this is contrary to provisions of the Employment Act which states that compensation is a salary that is paid based on an approved formula, when an employee is terminated, resigns or retires from employment.

“This was missing in the SITZ employment regulation and the government’s decision is to have a uniform platform whereby the provisions of the Employment Act will be included in the SITZ regulation whereby all employees will benefit,” Mr Elizabeth explained.

With regard to overtime payments within the SITZ, Mr Elizabeth went on to explain that under the Employment Act employees are exempted from tax payment on their overtime pay and with the proposed amendment the provision will apply to employees within the SITZ as well.

Mr Elizabeth further noted that following amendments in the Income Tax laws in 2018 it was proposed that compensation payments be covered under the Employment Act but there was an omission and the proposition did not feature in the amendments.

He said last year and this year as well, a large number of Seychellois employees, around 900, including from Indian Ocean Tuna (IOT), Ile Du Port Handling Services (IPHS) among the 20 companies under the SITZ who were paid their compensations, were taxed on the payment and their concerns have been put to the FSA as well as the Ministry of Finance, Economic Planning and Trade.

Following a review of the situation, it has been agreed that employees who have this year been taxed on their compensation will be refunded.

Mr Elizabeth noted that the FSA is working with the Attorney General’s Office to have the two regulations amended as soon as possible.

 

Marie-Anne Lepathy

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