Question:
Hi What are the provident fund tax benefits for employees? Is the tax benefits in a monetary sense for the employee the same as the retirement annuity? Thanks. Louis
Answer:
Louis, There are three tax benefits. Firstly, contributions are tax deductible. Employers may deduct up to 20% of an employee’s pensionable salary. Secondly, investment returns are tax free – there is no income, dividend withholding or capital gains tax paid within the retirement fund. Thirdly, benefits are taxed on a favourable basis – lump sum benefits are taxed on a sliding scale with a portion of the benefit tax free.
The information and answers supplied in this section do not constitute advice as defined by the Financial Advisory and Intermediary Services Act, 37 of 2002.
