Budget 2024   |10 November 2023

Ms Joymon and Ms Vidot during the press conference (Photo: Patrick Joubert)

New tax regimes to benefit employees and businesses

New tax regimes will be implemented as from next year to encourage better performance among employees and also encourage businesses to make substantial investments, Finance, National Planning and Trade Minister Naadir Hassan said in his budget address before the National Assembly on November 3, 2023.

Seylina Joymon, director general within the domestic and international tax policy division, and Odile Vidot, director general of the financial services and development division, met with the media yesterday at the trade department to elaborate on tax policies and financial schemes for businesses.

Giving details of taxes on bonus and performance-related pay, Ms Joymon explained the new structure for the taxing of bonus and salaries paid on the basis of annual performance where the amount up to one month’s salary is exempt from tax and any bonus up to 15% of the annual salary will be taxed at 15% and over that the tax rate will be at 20%.

She added that the current tax regime, based on the second schedule of the income and non-monetary benefit tax act, allows for only one twelfth (⅟12) of the bonus to be exempted and whatever balance left is taxed as per the progressive income tax regime.

She noted that this practice has been seen as unfair given that it does not encourage employees to improve their performance.   

For example, a person earning R10,000, and benefits from a bonus worth three months amounting to R30,000, using the current provision the person would be paying R4,000 as tax on the R30,000 earned. With the new proposal which will come into effect on January 1, 2024, the person will pay only R3,100 as tax on the R30,000.

Ms Joymon noted that the new tax regime is to encourage better performance among employees.

With regard to businesses involved in generation of renewable energy, they will get an additional five years of carry forward of losses, resulting in a 10-year carry forward of losses. Current provisions allow for five years of carry forward of losses. This new incentive will encourage more businesses to venture into the generation of renewable energy. The huge amount of investment required for the sector can often be a deterrent for new entrants. With new entrants, it will help the country in achieving its targets in relation to the production of renewable energy.

On the proposed tax holiday which will go towards three priority sectors – the blue economy, the digital economy and the manufacturing sector relating to products that will reduce the dependence on importation and, also, encourage exportation.

Ms Joymon said they will be exempted from paying taxes for the first five years.

She added that, however, they will still need to submit their tax returns to the Seychelles Revenue Commission (SRC).

She noted that the idea of the proposed tax holiday is to help diversify the economy by seeking other key pillars rather than relying only on tourism.

For the proposed allowable tax deductions for businesses making donations towards projects and programmes for the well-being of the community, Ms Joymon stated that businesses that make such donations are currently allowed 100% of the value of the donation to be deducted from their assessable income. As from 2024, the allowable deduction will increase to 150% in the hope that more businesses do come forward to support the community either through government institutions or non-governmental organisation (NGOs).

With regard to commission charged by booking platforms on the value added tax (VAT) amount, Ms Joymon advised that current contracts with these platforms do allow for this. Given that VAT and levies are collected by the tourism establishments and remitted to the SRC, it is not fair that the commission is charged on it. Similar to what was done when implementing the tourism environmental sustainability levy, a provision will be included whereby the booking platforms will not be able to charge for commission on the VAT amount that is due.

For her part, Ms Vidot spoke on the amendment made to the Income and Non-monetary Benefits Tax Act for 2024.

She said employers will as from January 1, 2024 not be charged the 15% tax currently applicable on non-mandatory (voluntary) and private pension contributions made by an employer, provided these contributions represent less than 8% of the employee’s salary.

She added that the removal of the 15% tax is to encourage increase in retirement planning and participation in voluntary contributions to pension.

She also noted that there is no change in the tax applicable for the mandatory pension fund contributions.

In addition, certain amendments are being made to the financing schemes run by commercial banks for small and medium enterprises where those with revenues below R10 million can benefit from a loan amount up to R3 million for eligible sectors/projects.

Under the scheme, the interest rate is subsidised by government to provide a rate of 5% on the first R1 million and 7% on up to the additional R2 million. 

The scheme is being amended to extend eligibility to projects for construction of affordable housing and to projects for improvements to existing touristic establishments. 

This is with the aim of encouraging the private sector to increasingly focus on development of affordable housing, and the scheme will not be open or available to finance high-end or luxury apartment projects.  In relation to tourism projects including guest houses, this will cater for transformation or expansion of existing establishments, to improve their service offerings and quality of product offered to the sector.

Referring to high tech farming, Ms Vidot said grants will be allocated to businesses looking to engage in such high tech farming practices and those covered under that scheme will also benefit from preferential interest rates.

Under the Agricultural Development Fund she noted that the Ministry of Finance, National Planning and Trade is working with the Ministry for Agriculture, Climate Change and Energy to appropriately define high tech farming to ensure a clear-cut definition of what falls within high tech and what is excluded for the grant to be finalised by the end of the first quarter of 2024.

The Agricultural Development Fund (ADF) was introduced to finance the development of small and medium-size agricultural and horticultural developments in Seychelles, particularly in terms of food security and it provides for loans from R25,000 to R5,000,000 with attractive applicable interest rates of 2.5% to 5%, and is managed by the Development Bank Seychelles (DBS).

Patrick Joubert