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I gave my employee a holiday and now SARS demands they pay tax

by , 30 June 2015
Some companies create a pressurised working environment encouraging staff to make more money. But you believe happy employees generate greater profits to your company.
So, once a year you treat your top performers to spend four weeks in Spain at your seaside villa without paying a cent. Now SARS's demands your employees pay the tax! And you don't understand why?
Well...If you give employees a free holiday or residential accommodation, it's a taxable fringe benefit. These might be one of the many benefits you give to your employees, that SARS will charge them tax on!
Let's look at two other fringe benefits you give employees, so you can deduct the tax correctly.

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Did you give a long service awards or awards for bravery to your employees? They must pay tax!

Any long service award or award for bravery is exempt from tax if its R5 000 or less. If it's not, the balance of the value of the award you give is a fringe benefit.

Structure your awards correctly to get the maximum tax saving for your employee. So if you give your employee more than one asset as a gift, calculate the value of each asset separately not cumulatively.

Does an employee use a private asset you own? Read on for more.

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Three things you didn't know about fringe benefits.

Do you know 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!

And that's why our experts David van Niekerk, a qualified Chartered Accountant, and Alan Lewis, a specialist tax law consultant and Advocate of the High Court of South Africa, have put together 77 solutions to the most common fringe benefits questions for you. And it's available in Your Fringe Benefits Problem Solver.

Click here to find out more about Your Fringe Benefits Problem Solver.

Does your employee use your asset that you own? This is a fringe benefit!

Let's say your employee uses any asset for private or domestic purposes, free of charge. If you own the asset, for example: a computer, then the employee's private use of the asset is a taxable fringe benefit.

Calculate the taxable fringe benefit as follows:
  • If you hold the asset as the lessee under a lease or hiring agreement, you must withhold employees' tax on the amount of the rental payable;
  • If the employee is the sole user of the asset for most of its useful life, the value of its private use is its cost to you. Tax the benefit from the date when the employee used the asset; and 
  • If you let an employee privately use an asset belonging to you: Tax him at 15% per year on either the cost of the asset or its market value from the day he starts using it (whichever is lower).
P.S. There are 11 other taxable fringe benefits; you can take advantage of too. Find out what they are here…

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