Starting next month, the Government is to cease upfront collection of withholding taxes on pension funds.

Errol Hudson, acting director general of tax administration, advised a meeting of the plan this week, sources said, which was later confirmed by tax administration spokeswoman Meris Haughton.

The Government has instructed that the existing policy, which required pension fund managers to claim refunds on withholding taxes paid over to the treasury on interest credited to funds under management, be changed.

Changes

"Yes, there has been some changes ... withholding tax on pension funds will not be deducted at source," said Haughton, head of communications for the Taxpayer Audit and Assessment Department (TAAD).

But she pointed out that the new policy, which becomes effective in June, is not a discontinuation of the tax.

Rather pension fund managers will have to apply for exemptions from paying over the taxes.

"It is something that would be similar to an individual who is in a position that would be entitled to an exemption, but they would apply for it and then we would instruct the institution not to deduct at source," Haughton explained.

Working through policy guidelines

Technocrats within the TAAD, she said, were "actually working through the policy guidelines as we speak that will instruct the pension schemes as to how it would operate".

Pension fund managers have long complained about the tardiness of Government in making refunds of withholding taxes.

Managing director of Prime Asset Management Limited, Rezworth Burchenson, noted that refunds have been very slow, but has improved since the start of the new financial year.

"But notwithstanding, there are large sums outstanding, especially for the funds that I manage. I am quite sure that's the same predicament for all fund managers," he said.

john.myers@gleanerjm.com