HomeHome SearchSearch MenuMenu Our productsOur products

Do you understand how to use the 3.5% rule for taxable fringe benefits?

by , 23 June 2014
Employees love it when you give them benefits. It generally saves them a huge amount of money when you consider the tax they pay on it is often so minor in comparison to the cost if they paid for the product or service themselves.

Your employees won't be so happy though if you get their tax wrong. And it's easy to over tax a fringe benefit if you're not sure of the basics.

So, to keep your employees happy and your tax correct, today we're explaining the 3.5% rule for taxable fringe benefits.

*********** Advertisement ************
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.
***********************************

3.5% is the golden number when it comes to taxable fringe benefits

 
It doesn't matter what taxable fringe benefit you give your employee, their tax will always be 3.5% of the full value of the company benefit. 
 
So let's say, for example, you let your employee use the company car. It's value is R150 000, the tax he'll pay each month is 3.5% of R150 000. So each month he'll pay R5 250.00 tax on the car.
 
That's the golden rule. But there's something you must remember when you apply it...
 

It's all about the CURRENT VALUE of the taxable fringe benefits

 
When you bought the company car it was R150 000. But let's say it's two years later and the car's value has depreciated. 
 
The depreciation is normally a 15% decrease each year. This means the car's value is now R108 375. That's now the value you must calculate your employee's tax on. 
 
So remember your employee's benefit tax must be on the benefit's current value. You should do a valuation on the benefit each year to ensure you're taxing your employee correctly. This will ensure they never pay more tax than they should. 
 
With this to rule in mind you can get your employees' taxable fringe benefits right every single time. 
 
*********** Product endorsement  ************
Put a stop to all your company car and travel allowance headaches today with this one tool
 
Get the answers to your biggest company car and travel allowance questions right now and avoid being hunted down by SARS for making costly mistakes.
 
Click here to get 69 solutions that'll put your company car and travel allowance headaches to rest.
*****************************************


Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>