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Overtime and Payment in Lieu of Annual Leave Exempt from Income Tax Effective 1st May 2011
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In line with the Vice President declaration made on 25 April 2011, the Second Schedule
of the Income and Non-Monetary Benefits Tax Act, 2010 has been amended to include the
following: an emolument being an overtime payment and an emolument being payment in
lieu of leave as exempt emoluments from income tax.
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What does this mean and what is its effective date?
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This means that income tax is no longer applicable on overtime payment and on payment
in lieu of annual leave. This exemption applies to all employees irrespective of salary
level or post being occupied and whether you are employed by the private or public sector,
or whether you are on a part-time, casual or full time basis.
These exemptions come into effect as from 1 May 2011. In other words, since 1 May 2011, there is
no income tax on overtime payment and payment in lieu of leave.
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What is Overtime Payment?
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Overtime is defined as additional or extra time worked beyond the normal hours of
employment for a payment at usually a higher rate than for the time worked during
normal hours of employment.
It is important to note that Overtime payment does not mean public holidays and time off converted
to cash, resignation or termination. The applicable rate of income tax of 15% is still applicable
on these payments.
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What is Payment in lieu of annual leave?
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Payment in lieu of annual leave occurs when an employee with the approval of his employer
cashes in his annual leave. There are varied reasons why a person would cash in his
leave. This includes shortage of staff hence inability of the other person to proceed
on leave, absence of key staff, the current work load, exigencies of the service in the
area where the person is working, among others.
Income tax will be exempted on payment in lieu of leave in situations where organisations have to
buy leave from workers. For example where an employee has 30 days annual leave and there is an
agreement between the employer and employee, where the employer decides to pay the employee in
lieu of that leave, that payment is exempt from Income tax. It needs to be proven that the employer
bought the leave from the employee because the employee is needed in the organization. The
accumulated annual leave of a person who resigns or is terminated does not fall in this criterion.
The full rate of 15% will be application in these cases.
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For more information
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If you need further clarification about the exemption of Income Tax on overtime and
annual leave, please visit the Seychelles Revenue Commission Advisory Centre,
Room 2 (Ground Floor), Ocean Gate House, Victoria or contact us on the following address:
Seychelles Revenue Commission
P.O. Box 50
Orion Mall
Victoria
Tel: 293737
Email: commissioner@src.gov.sc
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