The Government has always encouraged Jamaicans to prepare for retirement, by joining a private pension scheme, saving, and contributing to the National Insurance Scheme (NIS), administered by the Ministry of Labour and Social Security.
Upon retirement, Jamaicans who have been making contributions over the years to the NIS are entitled to a steady monthly income.
The NIS is a compulsory contributory-funded social security plan covering all employed persons in Jamaica. It offers financial protection to employees and their family against loss of income arising from injury on the job, incapacity, retirement, and death of the insured.
In addition to receiving their pension, eligible persons will also benefit from tax exemptions, once they fill out the required documents.
Tax Auditor and Supervisor for the Exemption Unit, Taxpayer Audit and Assessment Department (TAAD), Sharon Whyte, explains to JIS News that an exemption is an advice to a financial institution or an approved pension institution, informing of one’s personal tax payer allowance.
To be eligible for this exemption, retirees should be in receipt of pension from an approved pension scheme, such as the NIS. In applying for an exemption, Miss Whyte informs that persons need to complete a P01 (exemption) form and submit it to the TAAD. Along with other supporting documents, persons must also be in possession of a Tax Payer Registration Number (TRN).
“You need proof of all income. For most of the pensioners, it would be the NIS or any other pension scheme… We’ll just take a photocopy of the pension advice that they receive monthly or from the NIS booklet,” Miss Whyte says.
In addition, a withholding tax certificate from the financial institution in which the pensioner saves, is required to complete the transaction. Miss Whyte explains that financial institutions “tax all individuals at source, at say 25 per cent…but for the pensioners, they are no longer employed, so they can now utilise their tax free allowance against their pension and the remainder against their interest at the bank."
She points out that the TAAD will inform the financial institution of the tax free allowances due to the pensioner, once the documents have been completed.
The Tax Auditor tells JIS News that there is a threshold, which is part of an individual’s statutory income, which bears no tax. Persons 55 years and over are eligible for this threshold of $441,168. In addition to this, pensioners are due a pension allowance, and depending on the retirees’ age, are entitled to an additional age allowance.
“The age allowance is $80,000, and there is also an additional allowance for pensioners. Once you are receiving a pension from an approved pension scheme, you get another $80,000 allowance,” she informs.
“So, the ceiling for any one individual is $601,168. That is the total tax free allowance, but anything in excess of that, would be taxable at 25 per cent. So, you would have some persons not reaching the $80,000. For you to get the age allowance, you have to be 65 and older,” Miss Whyte notes.
Once all the required documents have been submitted to the TAAD, the process then takes six to eight weeks to be completed. “The internal processing takes a little time, because we try to put everything on the system,” she adds.
If you are a pensioner and would like to benefit from tax exemptions, visit the TAAD and make an application. You can do so between January and September each year.
For further information contact the TAAD toll free at 1888 tax help or 1-888-829-4357 or visit their website at: www.jamaicatax.gov.jm.
BY: ALECIA SMITH