The National Revenue Authority (NRA) has announced a reduction on taxes paid on redundancy payments. The Deputy Commissioner of the Domestic Taxes Department, Alfred Akibo-Betts explained that under the Income Tax Act 2000 as amended, redundancy and retirement payments which are made to employees when their employment are terminated have special tax treatment where an amount paid up to a limit is tax free. As such, he added, redundancy and retirement payments are usually divided into two components for tax purposes namely the tax free amount and the assessable amount. Mr. Akibo-Betts stated that under the Finance Act, 2015, the tax free threshold has been amended as follows: Old Provision Below Le20, 000,000: 0% Tax; Above Le20, 000,000: 30% Tax New Provision Below Le50, 000,000: 0% Tax; Above Le50, 000,000: 5% Tax As illustrated below, this amendment is good news for retirees as it gives them more money in their pockets. With the new provision, an annual income earner of Le 100,000,000 will now earn Le 21,500,000 more as compared to the old provision under redundancy payment as demonstrated in this example below: Old Provision Below Le20, 000,000: 0% Tax; Above Le20, 000,000: 30% Tax Annual income of Le100, 000,000 First Le 20,000,000- 0% Tax = 0 Next Le 80,000,000- 30% Tax= Le 24,000,000 Le 100,000,000 – Le 24,000,000 (Tax) = Le 76,000,000 New Provision Below Le50, 000,000:0% Tax; Above Le50, 000,000: 5% Tax Annual income of Le100, 000,000 First Le 50,000,000- 0% Tax = 0 Next Le 50,000,000- 5% Tax= Le 2,500,000 Le 100,000,000- Le 2,500,000 (Tax) =Le 97,500,000