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Revealed: Eight employee fringe benefits that qualify for output tax

by , 21 June 2013
US President Barack Obama's trip to sub-Saharan Africa later this month has sparked criticism for the hefty price it carries. It's expected to cost American taxpayers as much as $100 million. Among the related costs will be fighter jets, hundreds of Secret Service agents, a Navy ship with a full trauma centre and military cargo planes to bring 56 vehicles including 14 limousines and three trucks loaded with sheets of bullet proof glass to cover the windows of the hotels where the first family will stay, Fox News reports. Obama's trip has certainly put the spotlight on employee fringe benefits in a struggling US economy. But fringe benefits don't just relate to the States. In terms of South Africa's Vat Act, there are eight employee fringe benefits you must calculate output tax on. Read on to discover what these benefits are so you can declare the fringe benefits on your Vat return and ensure your payroll is 100% Vat-compliant.

Rewarding your employees in any way has Vat implications for you. So make sure you deal with this correctly.

'If you don't, SARS will assess you and charge you with penalties and interest, calculated all the way back to when you first made the mistake,' says the Practical Vat Loose Leaf Service.

Avoid this happening to your company and declare output tax to SARS on any fringe benefits you award.

But do you know which fringe benefits qualify for output tax?

The following eight employee fringe benefits qualify for output tax:
  1. Rewarding employees for great service. For example, your salesman of the year wins an all-expenses-paid trip for himself and a partner.
  2. Goods or services given to relatives of employees. For example, instead of paying Mr Q a bonus, your company pays for his wife to accompany him on a business trip to Durban.
  3. Purchase of an asset at less than the actual value, for instance, Miss K is allocated a company vehicle. After three years, your company decides she can buy the vehicle at 75% less than its market value.
  4. Right of use of a company asset. For example, allowing an employee to take home and use a company computer.
  5. Free meals and refreshments, for example your company gives staff breakfast and lunch for free.
  6. Free or cheap services. Let's say you're a cosmetics and skin care company, and you give your staff free facials. This will count as a fringe benefit.
  7. Medical costs incurred by your employer. For example, your company pays for your staff's medication, such as antiretroviral drugs.
  8. Vehicles given as company cars.
Knowing which employee fringe benefits qualify for output tax will ensure your payroll is 100% Vat-compliant.

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