oes your company have accommodation and want to let one of your employees use at no charge?
Be careful! You can't just give it to him. If you give him the accommodation for free or for less than the true rental value, it's a taxable fringe benefit, (Paragraph 9 read with paragraph 2(d) of the Seventh Schedule).
You have to let payroll know so they can withhold and deduct the correct amount of employees' tax. If you don't do this, you'll face penalties from SARS!
There are two types of accommodation you can provide your employees. Let's have a look
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!
Two types of accommodation you can provide your employees
Holiday accommodation. This is short-term accommodation such as a holiday flat; and
2. Residential accommodation. This is long-term accommodation where you give your employees a place to live.
How to calculate the rental values
Let's look at the calculations for each type of accommodation.
How to calculate the rental value for holiday accommodation for staff
To calculate the rental value if you provide your staff with holiday accommodation, you can either use the prevailing rate-per-day, or you can add the rental value you paid for it with any amounts you paid for meals or for services relating to the accommodation (e.g. cleaning services), (Paragraph 9(4) of the Seventh Schedule).
Let's now look at how to calculate the rental value for residential accommodation.
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How to calculate the rental value for residential accommodation
You have to calculate the rental value for fringe benefits tax by using whichever amount is higher – either:
• The cost to you as the employer of providing the accommodation; or
• The amount you get when you use the prescribed calculation formula below.
How to use the prescribed formula:
(A - B) x (C/100) x (D/12)
A = The employee's total annual remuneration
B = Abatement of R67 111 (this figure is set by SARS).
C = A score based on the number of rooms, etc. that the house/flat consists of.
D = The number of months in the tax year that the employee occupies the house/flat.
The abatement amount (B in the above formula) is nil if:
• You have a private company and your employee or his spouse controls the company;
• If you're one of the people controlling the company; or
• Your employee, his spouse or minor child has a right of option you've granted.
What's the score for your house/flat (this is 'C' in the formula)?
Score Features of apartment/house
17 - It has at least four rooms.
18 - You've provided furnishings but not the electricity (or vice versa).
19 - You provide the furnishings and the electricity.