Employees jump at any company benefits you offer. These benefits give your employees the chance to get goods and services that they couldn't normally afford, for cheap or even free.
But before you start handing out these employee benefits left, right and centre, ask yourself: 'Just how cheap or free are these services?'
Because of fringe benefit tax, they may not be cheap at all...
Here's why those 'cheap and free' services may not be cheap or free
Thanks to fringe benefit tax, your employees must pay 3.5% of the services value in tax. This means, even though the service is much cheaper than what they'd normally pay for it, it still isn't as cheap as you intended it to be.
For example, let's say you provide your employee with a gym membership that costs R1 500 a month. Your employee pays 3.5% of R1 500 each month on that service.
So even though he now only pays R52 a month for a top of the range gym contract, it's still not as cheap as you planned.
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12 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!
Find out how to make sure every time you offer a fringe benefit to your employees you'll know if it's taxable or not and how to tax it correctly.
Five services you can offer your employees tax-free
1. A workplace service that helps your employees perform better. For example, an advisor that helps them cope with stress.
2. Communication services that your employees use mainly for business, such as business cell phones.
3. A workplace service you offer your employees to enjoy at work. This could be, for example, a massage therapist to help employees destress.
4. A service you offer for recreational purposes. For example, if you own a movie house and let employees watch movies for free.
5. A place you provide your employees with for the purpose of recreation. For example, an office bar or swimming pool.
So don't forget about the tax those 'free' services cost your employees if you offer them any services except these five.