Government removes tax on private pension benefit payments

August 06, 2021

The Government has taken the decision to introduce a tax exemption on private pension benefit payments

The decision was taken at the Cabinet meeting on Wednesday 28th July 2021.

Speaking to the media this morning, to give further clarification on the matter, Ms. Odile Vidot, Director for Financial Sector Policy, explained that currently, a tax is being levied on private pension benefit payments, under the Income and Non-Monetary Benefits Tax Act.

“The Government sees contribution in private pension as a savings for an individual and thus acts as a supplement for when they retire, therefore such a tax is not encouraging this practice.”

The present system in place, allows for a tax to be levied upon payment of the pension. This may represent double taxation, Ms. Vidot explained, as employees’ contributions into the pensions would have been paid in after paying income tax on their salary.

The exemption is the first phase of a complete overhaul of the Income and Non-Monetary Benefits Tax Act to bring in more clarity, especially in regards to definitions as they relate to pensions.

“The law needs to be aligned with all other existing definitions when it comes to what constitute a pension.”

Currently there are fewer than 10 companies, providing their staff the option to contribute in a private pension.

The new measure will come into effect once it is published in the Gazette.

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