One of our Praxima clients recently reached out with a compliance query regarding the deductibility of their employee’s life insurance contributions. According to the current statutory employee benefits, there are no mandatory contributions for employers or employees. The distinction between different types of benefit contributions will determine whether they are deductible.
We considered Section 41 of the Income Tax Act 52:01 (ITA), which sets out specific allowable deductions. Our review confirmed that contributions made toward a private life insurance policy are not tax deductible in Botswana.
The Act does not provide for the deductibility of premiums paid to life insurance policies, even where those contributions are structured through payroll.
The position differs, however, when contributions are made to an approved superannuation fund. Under Section 51(3) of the ITA, employee contributions to an approved superannuation fund are deductible up to a limit of 15% of taxable remuneration.
Superannuation funds are designed for retirement and pension purposes. They are structured, regulated savings vehicles intended to provide income in retirement.
Life insurance policies, by contrast, typically provide a lump sum benefit payable upon death and do not fall within the same retirement savings framework contemplated by the Act.
The deductibility question therefore depends entirely on where the contribution is made:
The Income Tax Act draws a clear line between retirement-focused superannuation contributions and private life insurance arrangements for the tax treatment of employee benefit contributions
Understanding that line helps employers ensure accurate payroll withholding and avoid unintended tax exposure.
If this article raised questions or highlighted areas you’d like to understand better, let’s talk.Our team can walk through the details, implications, and practical considerations for your business.
