housing sold to employees< MV discussion

Question 1

Discuss the possible normal income tax consequences, if any, for the marketing
assistants on the flats sold to them by Uhuru during 2023 year of assessment.

Answer 1

The issue is whether the cash equivalent of the benefit will be included in terms of par. (i) of the
gross income definition.

Question 2

Uhuru sold the flats to its employees at below market value (R50 000 each, when the open market
value was R445 000 each). This is the acquisition of an asset by an employee from an employer
for a consideration less than market value

Answer 2

The cash equivalent of the value of the taxable benefit determined in terms of par. 5(1) and (2)
would be the market value of the asset on the date acquired by the marketing assistants less the consideration given by the employees.

Question 3

1 However par 5(3A) determines that when the market value of the property is less than R450 000
(on the date the flats were acquired it was R445 000),

Answer 3

and as the marketing assistants earn remuneration less than R250 000 per annum (between
R8 000 and R20 000 per month —> Between 96 000 and 240 000 per annum), and 1
5.3 they are not connected persons to Uhuru, as they do not hold any shares in the company.

Question 4

Par. 5(3A) of the Seventh Schedule will place no value on the flats acquired by marketing
assistants.

Answer 4

Further to this, the acquisition cost of the flats is not deductible for the employees as its capital
in nature.
There are various alternative here (i.e. private expenditure (i.e. s23(b); s23(m) etc.)