Taxable Fringe Benefits Flashcards
para 2(a): Acquisition of asset for no or inadequate consideration.
Valuation Rule (5): • Market Value or • Cost if • Movable Property and acquired to give to employee • If Trading Stock o Lower of cost or market value
Reduced by the amount paid by employee.
Exception:
Bravery/Long Service
• Value is reduced by the lesser of the
• R5 000 or
• Aggregate cost of awards during the year
Immovable property - No value if:
• The remuneration proxy less R250 000;
• Market value of property less R450 000; or
• The employee and Employer is a NOT connected person.
para 2(b): Right of use of asset other than residential accommodation or motor vehicle for PRIVATE and DOMESTIC
Valuation rule (6): -Rental paid by employer or -If owned by the employer - 15% p.a. of the lower of • Market Value (@date of use) or • Cost to employer
If granted SOLE right of use for a major portion of useful life – the value is the cost
Reduced by the amount paid by employee.
Para 6(4) – No VALUE:
• Incidental private use or for recreational use by all employees in general.
• Any equipment or machines which employees are allowed to use for short periods of time provided less than amount set out by CSARS.
• Telephone/computer equipment mainly used for business purposes
• Assets consists of books, literature, recordings or works of arts
para 2(b): Right of use of motor vehicle
Valuation rule (7): Private use valuation rules: • maintenance plan: 3.25% per month x Determined Value • no maintenance plan: 3.5% per month x Determined value * A Maintenance plan is defined in terms of -7(11) • Acquired under operating lease definition in s23A(1): Private use = Operating lease costs + fuel costs
Part months apportioned by days
Determined value: Retail Market Value
• If employer acquire the vehicle for no cost. The retail market value on the date employer first acquired the motor vehicle. (inclusive of VAT)
Proviso:
If the vehicle was acquired by the employer before the date that the ‘right of use’ was first granted to the employee or if the right of use was first granted to another employee:
• Reduce by 15% p.a. (reducing balance method) for every completed period of 12-month period from date of acquisition.
• No reduction in the value if temporarily not used for private purposes.
• What if more than one vehicle is available for use at the same time?
Two reductions of the value of private use:
• 7(7) Business use percentage reduction AND
• 7(8) Employee bears the full cost of some of specific expenses
7(7) Business travel reduction:
• If employer has kept accurate records of distance travelled for business and private purposes in the vehicle are kept
• adjustment: Value of private use x (business km/total km)
7(8) Private expenditure reduction:
• When accurate records of distance travelled for private purposes in the vehicle are kept and the employee bears the full cost of any of the following:
• License; Insurance; Maintenance; or Fuel (for its private use)
Adjust for license, insurance and/or maintenance costs:
• (Private KM / Total KM) x full cost
Adjust for fuel cost:
• Private KM x deemed fuel rate per kilometre as per the Gazette.
Exception:
No value placed on:
• Pool cars
• Business vehicles eg. Ambulance, tow truck
Link to travel allowances:
Vehicle leased by employee to employer:
• s8(1)(b)(iv)
• Treated as travel allowance
Right of use + travel allowance granted on the same vehicle:
• s8(1)(a)(i)(aa)
• Right of use: reduction allowed
• Allowance: no reduction allowed
para 2(c): Meals, refreshments & vouchers
Valuation rule (8):
Cash Equivalent:
• Cost to employer
• Less amount paid by employee
Exception: 8(3) No Value on: • Canteen; • Business hours or extended working hours; and • Providing entertainment.
para 2(d): Residential accommodation
Valuation rule (9): Rental value: Rented by the employer: lower of • Formula or • Rent cost paid by employer Holiday accommodation: • Rented: costs borne • Owned: prevailing rate Other: • formula
Formula: (A - B) x C/100 X D/12
A= Remuneration proxy
• Defined in s1
• Remuneration in prior year from this employer grossed up to 365 days
• If didn’t work for employer last year, then gross up 1st month of current year by days
B= R78150 or R0 if:
• Employer is private company controlled directly or indirectly by employee and/or spouse, or
• Employee, spouse or minor child has right or pre-emptive option to become owner, granted by employer or by arrangement with employer
C=17 or if 4 or more rooms
• 18 if furniture or power
• 19 if furniture and power
D= number of months
Sundry provisions:
• Commissioner may reduce rental value
• Determining the valuation of the taxable benefit where more than one house is provided
Exception:
No value is placed on:
• Accommodation if the employee is away from usual residence within SA as result of his duties.
• SA accommodation provided to expats:
– P9(7A)(a) For first two years; or
– P9(7A)(b) If the Expat is in SA for less than 90 days
Para 9(7A)(a) is not applicable if:
• Expat was present in SA for more than 90 days in previous year of assessment, or
• To the extent that taxable benefit on the residential accommodation exceeds R25,000 per month
Where the employee has:
• The right of accommodation; and
• Has an ‘interest’ in accommodation
There is no gross income inclusion on the rental paid by the Employer to the Employee.
para 2(e): Free or cheap services
Valuation rule (10):
Where an employer has:
• incurred the expense of any service rendered to the employee,
• where that service has been utilized by the employee for his/her private purposes and
• no consideration is payable by the employee or a consideration less than market rate or lowest fare(for travel service)
Value = Cash value to employer
(reduced by amount paid by employee)
*exception: international sea or air travel (lowest full fare less consideration)
Exception: international sea or air travel (lowest full fare less consideration)
No Value is placed on this benefit where the:
• Employer’s business is travel by land, sea or air
o SA or international overland travel, or
o International travel - sea or air - employee, spouse or minor child unable to book seat or birth in advance
• Transport by employer between home and work
• Communication services used mainly for employer’s business (e.g. home internet)
• Services rendered by employer:
o To improve employee performance, or Recreational facilities, or
o To be enjoyed at work
• Travel facilities to spouse or minor child where employee is stationed more than 250kms away from normal residence (but within SA) for more than 183 days in year of assessment.
para 2(f) Low interest loans
Employee interest + employer subsidy < interest at official rate
Valuation rule (11):
Cash equivalent value:
• Interest at official rate
• Less interest incurred by employee
If the employee had to pay interest on the loan and such interest would have been in the production of income.
Then for the purpose of s11(a) the taxable benefits which is included in the taxpayer’s taxable income will be deemed to be interest actually incurred by him.
Exception: No value on: • Loan < 3000 (in aggregate) • Study loan • Loans on immoveable property **
para 2(g): Loan subsidies
Valuation rule :
Cash equivalent value: value of the subsidy
Exception:
para 2(h): Payment of employee debts or release of obligation to pay debt
Valuation para ():
Exception:
13(2): No Value shall be placed on:
• A payment of a subscription to required professional body
• A repayment of a bursary under certain circumstances
para 2(i): Medical aid fund contributions
Valuation rule (12A): Cash Equivalent = Amount paid by employer to medical aid. • If amount paid for specific employee cannot be calculated – use average
Exception:
12A(5) No Value if:
• Person retires due to superannuation, ill health or other infirmity;
• Dependents after employee’s death; or
• Dependants of deceased retired employees.
para 2(j) and 12B: Payment of medical expenses
Cash Equivalent: amount paid by employer
Exception:
Para 12B(3) No Value if:
• Person retires due to superannuation, ill health or other infirmity;
• Dependents after employee’s death;
• Dependants of deceased retired employees;
• Person over the age of 65; or
• If the employee provides those services in general to all employees at the work place.
para 2(l):
Retirement fund contributions
• Pension/Provident/RAF
Valuation rule:
Para 12D(2) Cash Equivalent:
Amount contributed by employer for the benefit of an employee
Exception:
Para 12D(6) No Value if:
• For the benefit of a person who has retired or
• Dependents after employee’s death.
