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Paying your employee back for the business calls he makes on his cell phone? Find out if it's taxable or not

by , 11 July 2014
You run a very busy company where some of your employees have to be available to your clients 24/7. This means they often have to make business calls from their personal cell phones.

And while you happily reimburse your employees for the money they spend on those calls, have you considered the tax implications of doing this?

Read on to find out what you need to know...

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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!

 Reimbursements aren't taxable fringe benefits

The general rule in this situation is: Anytime you reimburse your employee for expenses he paid for to do his job, it's not subject to employee tax.
This means it's not a taxable fringe benefit and your employee won't pay tax on it.
But there is one situation when this rule won't apply and your employee will have to pay fringe benefit tax...

You have to treat reimbursements as a taxable fringe benefit in this situation

If the cell phone account isn't in your employee's name. For example, if his wife is the one who took out the contract in the first place.
If this is the case, your employee must prove that he's the one that paid for the expenses. So if his wife's name is one the contract and your employee pays the account, he must prove it.
He can do this with his bank statements that show the cellular provider deducts the money out of his bank account.
After all, if your employee doesn't actually pay the expenses then reimbursing him the amount is a company benefit. This means you need to treat it as a normal taxable fringe benefit by adding 3.5% of the reimbursed amount onto your employee's PAYE.
So ensure you don't run into problems with SARS over this, always check if your employee is the one who pays these expenses before you reimburse him.
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