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Before you hand out fringe benefits to employee, first find out if they're taxable so you don't land up with SARS penalties

by , 07 January 2015
Giving your employee's benefits shows them how much you appreciate them. That, in turn, will motivate them to work harder for you.

But you mustn't just go handing out fringe benefits to your employees. If you do, you could give them a taxable fringe benefit and not even know it. The result? You and your employee will be guilty of not paying money to SARS.

That's why I'm going to show you exactly which employee benefits are taxable fringe benefits and how you need to handle them...

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13 Taxable fringe benefits - are you taking advantage of all of them?
There are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them... 
This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!
There are 13 taxable fringe benefits
1. Giving your employee an asset for free, or for a price lower than its value;
2. Letting your employee use assets owned by you (other than a company car);
3. Giving your employee a company car for his private use;
4. Giving your employee free meals, refreshments or meal vouchers;
5. Providing your employee with free or cheap accommodation, or giving him the option to purchase residential accommodation you own for less than the market value;
6. Providing your employee with free or cheap services;
7. Giving your employee low interest or interest-free loans;
8. Providing employer subsidies;
9. Paying a debt on behalf of an employee or paying a bursary or scholarship for the employee or his relative;
10. Paying medical aid contributions on behalf of your employee;
11. Paying employee medical expenses on his behalf;
12. Contributing towards an insurance policy on behalf of your employee; and
13. Giving your employee's relatives some benefits.
Remember, if you give your employees any of these company benefits, they must pay fringe benefit tax
Here's how you must handle this tax.
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Here's what you have to do to handle fringe benefit tax correctly

The important thing to remember with taxable fringe benefits is that this tax is in addition to your employee's normal PAYE. It's not included in it.
This means when you send your employee's tax to SARS every month, you must include the fringe benefit tax as well.
To do this, you have to work out what the tax on the specific benefit is. The rule to remember here is it's normally 3.5% of the value of the benefit. 
For example, if you give your employee a laptop to use at home and it costs R7 000, the tax is 3.5% of that.
That means you'll add R245 to your employee's monthly taxes. 
But, you can decrease that tax depending on how much your employee uses it for business. 
For example, your employee only uses the computer to access his private emails at home, the rest of the time he uses it for work activities only, you can decrease the tax so he only has to pay it on the amount of private use. 
To find out how to do this, check out the Fringe Benefit Guide
There you have it. Make sure you always treat taxable fringe benefits correctly so you don't land up with SARS penalties for not handing over employee taxes.

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Before you hand out fringe benefits to employee, first find out if they're taxable so you don't land up with SARS penalties
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