Fringe Benefits Tax Flashcards
What is a fringe benefit?
Any asset, service or other benefit in kind provided to an employee by an employer if such a benefit includes an element of personal benefit to the employee.
Defined under S2 of the Taxation Act
Who is liable to pay fringe benefit tax?
Every employer, other than the Government, who provides fringe benefits to any of his employees
shall be liable to pay fringe benefits tax on the total taxable value of such fringe benefits at the rate
specified in the Eleventh Schedule subject to and in accordance with regulations made under this
Act.
S94A (1) specifies the conditions for liability.
What is the rate of fringe benefits tax?
35 per cent of the taxable value of fringe benefits.
This applies to the total value of fringe benefits provided.
What does fringe benefits tax apply to?
Applies to payments made by the employer to a third party for the benefit of the employee (non-cash benefits).
The employee is liable to tax on payments made directly to him.
What is excluded from the definition of fringe benefits?
Any amounts paid in cash to an employee by an employer.
This distinguishes cash payments from benefits in kind.
What is the registration requirement for employers providing fringe benefits?
An employer must register with the commissioner within 14 days after beginning to provide fringe benefits by completing form FBT 1.
This ensures compliance with tax regulations.
Fill in the blank: Fringe benefits are provided in _______ and do not include cash payments by the employer to the employee.
kind
True or False: An employer is not required to register if they provide fringe benefits to employees.
False
Employers must register within 14 days of providing fringe benefits.
What is the taxable value for housing accommodation owned by the employer?
50% of the greater of:
* Open market value of use (rental)
* 10% of the employee’s salary for unfurnished housing
* 12% of the employee’s salary for furnished housing
This calculation applies to the property directly owned by the employer.
What is the taxable value for housing accommodation rented by the employer?
The greater of:
* Rental paid by the employer for the property
* 10% of the employee’s salary for unfurnished housing
* 12% of the employee’s salary for furnished housing
This applies to properties that the employer rents for employee accommodation.
For unfurnished housing provided by the employer, what percentage of the employee’s salary is used to determine taxable value?
10%
This percentage applies when the employer provides unfurnished housing.
For furnished housing provided by the employer, what percentage of the employee’s salary is used to determine taxable value?
12%
This percentage applies when the employer provides furnished housing.
Fill in the blank: The taxable value for an employer-owned property is determined as the greater of the open market value or _______ for unfurnished housing.
10% of the employee’s salary
This is part of the calculation for taxable value of housing accommodation.
True or False: The taxable value for rented housing accommodation is based solely on the rental paid by the employer.
False
The taxable value also considers percentages of the employee’s salary.
What is the taxable value of motor vehicles per annum?
15% of the original value
This is applied for each year the motor vehicle is used.
What percentage of school fees paid by an employer is considered a taxable benefit?
50% of the total cost to the employer
This applies when the employer pays school fees and related expenses directly to an institution.
What is the tax implication of a personal loan interest rate lower than the commercial rate?
The difference shall be a taxable benefit
Education loans, emergency advances, medical loans, and funeral expenses loans are exempt from FBT.
What is the taxable value of domestic services provided by an employer?
The entire cost to the employer
This includes services such as gardeners, maids, cooks, nannies, housekeepers, security guards, and watchmen.
Are the costs of a gardener, security guard, and watchman taxable if the property is owned by the employer?
No, the cost is not considered a taxable benefit
This applies only if the property is owned by the employer.
What is the taxable value of utilities provided by an employer?
The entire cost of the utility to the employer
This includes electricity, water, and telephone (including mobile phones and airtime).
What is the taxable value for other fringe benefits provided by an employer?
The entire cost to the employer
This includes household items, vacations, travel, and any other provisions.
Are medical care and uniform expenses for employees considered taxable benefits?
No, they will not constitute taxable benefits
This applies when the employer meets the cost of these expenses.
What reduces the taxable value of fringe benefits?
The taxable value is reduced by:
* Amount contributed by the employee
* Proportion of the period the benefit is provided
If the benefit is not provided for a whole year, the taxable value is adjusted accordingly.
When is fringe benefit tax due?
Fringe benefit tax is due within 14 days from the end of each quarter
The quarters are:
* 1 July - 30 September
* 1 October - 31 December
* 1 January - 31 March
* 1 April - 30 June
What form must accompany the fringe benefits tax due?
Form FBT 2 (Fringe benefit tax quarterly return and remittance form)
This form is required for submitting the tax along with the payment.
What records must an employer keep for fringe benefits tax?
An employer must keep records showing:
* Nature of fringe benefits provided
* Names of employees receiving fringe benefits
* Taxable values of fringe benefits
These records must be available for inspection by the commissioner or authorized officers.
What are the main offences related to fringe benefits tax?
The main offences are:
* Failure to register within the required period
* Failure to pay fringe benefit tax by the due date
Committing these offences incurs a penalty.
What penalty is imposed for offences related to fringe benefits tax?
A penalty of 20% of fringe benefits tax due
The penalty must be paid together with the fringe benefits tax due.
