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TXN 201 > 7. Fringe Benefits > Flashcards

7. Fringe Benefits Flashcards

0
Q

From who and to who do fringe benefits go?

A

From employer to employee

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1
Q

How many fringe benefits are the that we look at?

A

11

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2
Q

How are fringe benefits dealt with in tax?

A

Included in taxable income as a converted cash amount

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3
Q

What are the first three fire benefits we look at?

A
  1. Acquisition of an asset at less than fair value
  2. Right of use to asset other than motor vehicle
  3. Right to use of motor vehicle
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4
Q

What are the second three fringe benefits we look at?

A
  1. Meals, refreshments and meal vouchers
  2. Free/cheap accommodation
  3. Free/cheap services
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5
Q

What are the third three fringe benefits we look at?

A
  1. Low interest/interest free loans
  2. Subsidy in respect of loans
  3. Medical aid contribution on behalf of employee
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6
Q

What are the last two fringe benefits we deal with?

A
  1. Medical service costs

11. Payment of employee debt / release of employee obligation

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7
Q

What do fringe benefits form part of?

A

Gross income

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8
Q

What if an employee used an asset for business purposes only?

A

There will be NO tax consequences

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9
Q

What deals with specific fringe benefits?

A

The Seventh Schedule

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10
Q

What are the two reasons fringe benefits would be included in gross income?

A

Either:

  1. It is in seventh schedule
  2. It relates to services
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11
Q

Who is taxable if person A receives money in respect of person B rendering a service to an employer?

A

Person B

So the one rendering the service is deemed to have received the income

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12
Q

What are done with unexpected allowances?

A

They are included in the taxable income

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13
Q

What is the general formula for fringe benefits?

A

Cash equivalent - amount paid = amount included

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14
Q

Who is taxed if a relative of an employee receives a benefit?

A

The employee themselves are taxed

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15
Q

If an associated institute grants benefit?

A

Still taxable in hands of employee

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16
Q

Who’s obligation is it to determine the cash equivalent of a benefit?

A

The employers

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17
Q

What is an employer?

A

Anyone who pays remuneration to someone

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18
Q

What is an employee?

A

Anyone who receives numeration, this included:

  • labour broker
  • personal service provider
  • employees
  • directors
  • previous directors
19
Q

How many exclusions are there for taxable benefits?

A

6

20
Q

What are the first three exclusions of taxable benefits?

A
  1. Specifically exempt in section 10
  2. Benefit fund such as medical, dental, hospital, nursing
  3. Lump-sum benefits from retirement funds such as pension and provident
21
Q

What are the last three excluded benefits we deal with?

A
  1. Income received to person outside republic
  2. Qualifying equity share
  3. Severance benefit
22
Q

What are the requirements that must be met for a person receiving income outside the Republic to be excluded from taxable income?

A

They render the service such as:

  1. National or provincial sphere of government
  2. Municipality of Republic
23
Q

What falls outside general for assets acquired at less than fair value?

A

Trading stock and moveable assets purchased for employee

24
Q

Hw much is taxable when cash is given for bravery or long service?

A

The full amount

because it’s cash

25
Q

What assets are excluded when dealing with assets purchased for less than fair value?

A
  1. Meals, refreshment, vouchers, fuel power and water
  2. Marketable security
  3. Qualifying shares
26
Q

What is the cash equivalent?

A

(Market value of asset at time given to employee) - (amount paid by employee)

27
Q

What are the exceptions for using the market value for assets purchased at less than fair values?

A
  1. If moveable asset purchased for employee: value = cost

2. If trading stock sold to employee: value = lower of cost or market value

28
Q

What are the exclusions for assets given to employee for less than fair value?

A
  1. Asset given for bravery for long term service: Reduce cash equivalent by lesser of cost or R5000
  2. Fuel or lubricants for company car: not a taxable benefits
29
Q

What does long service mean?

A

Initial unbroken period for not less than 15 years

Subsequently not less than 10 years

30
Q

What is to be remembered when applying exemptions?

A

Exemption only apply to ASSETS not cash rewards

31
Q

What does right of use mean?

A

The employee can use it but does not own it

32
Q

What happens when private use of an asset is incidental or minimal?

A

No fringe benefit will arise

33
Q

Are there any differences wether an employer owns or leases the assets and employee receive rights to use it?

A

Yes there will be different rules

34
Q

Are there differences when a an employee may have right to an asset temporarily or if they can use it till useful life is up?

A

There will be different rules for this too

35
Q

What is the cash equivalent of a right o use of assets?

A

(private use value) - (amount paid by employee)

36
Q

Are the values for right to an asset apportioned?

A

Yes

37
Q

What is the value of an asset if the employer leases it and gives rights to employee?

A

Rent payable by employer for the period of employee use

38
Q

What is the value of an asset owned by employer and right of use are given to employee?

A

(15%) x (lesser of cost or MV date right was granted) x (number of months used during current year of assessment)

39
Q

What is the value of an asset where the sole right of an asset is given to the employee?

A

Cost of asset to employer on date rights were given

40
Q

What is an exclusion?

A

This means there will be no taxable benefit

41
Q

He many exclusions are there for rights of assets given to employee?

A

5

42
Q

What are the exclusions for rights of assets given to employee?

A
  1. Private use is incidental to business use
  2. Asset is provided as amenity to be used at workplace
  3. Employer allows employe to use it for short times
  4. Telephone or modem mainly used to business
  5. Books, literature etc.
43
Q

What are the rates that company cars are taxed on?

A
  1. One vehicle = 3.5% per month
  2. One vehicle with maintenance plan = 3.25% per month
  3. Two or more vehicles = 3.5% or 3.25% on the vehicle carrying highest value
44
Q

In order to determine the value of a company car, what is done with VAT and finance charges?

A
  1. VAT is INCLUDED

2. Finance charges are EXCLUDED

TXN 201 (9 decks)

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