Stop! Before you give your employee a loan or a gold watch for their long service, you have to be aware that these perks could be taxable fringe benefits.
This means your payroll must withhold and deduct the correct amount of employees' tax, or face penalties! And your staff will question the extra taxes on their payslips, if you haven't explained things correctly.
Read on to find out which perks SARS taxes and how they're taxed, so your payroll will always stand up to a SARS audit.
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Beware of these five taxable fringe benefits.
Taxable fringe benefit #1: You give your employee an asset for free or for cheap!
So you buy a tablet for each company executive, so he can enjoy the best connectivity to the office and his clients.
The cash equivalent of this benefit is the difference between the value of the asset and whatever the employee paid for it.
This amount is remuneration. So you must deduct the employee's tax from this amount.
Taxable fringe benefit #2: You let your employee use any of your assets for personal use.
So let's say your employee uses your personal laptop for private use, for free. This is a fringe benefit.
You must tax the employee on the cost of maintaining that asset.
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Taxable fringe benefit #3: Your employee uses the company car for private travel.
A car provided by your company for the business and sometimes private use of an employee. Usually, the company covers all the costs of the car – from the cost of its purchase, to its maintenance costs.
The employee's private use of the company car is a perk (i.e. a fringe benefit). You must deduct PAYE on the value of the private kilometers, which the employee travels in the company car. The employee refers to these private kilometers as the private use of the car.
Taxable fringe benefit #4: You give your employees free meals or refreshments
If you give your employees any of the above free of charge or less than their actual value, you must tax this as a fringe benefit. The value placed on this perk is its cost to you.
Taxable fringe benefit #5: You give your employees free or cheap accommodation or a holiday.
If you give your employee residential accommodation, either free or for rent less than the true rental value, it's a taxable fringe benefit.
The cash equivalent of the taxable benefit is the rental value of the accommodation less than any rent the employee pays you. It also includes the value of any household goods you supply with the accommodation.
There are another eight perks SARS taxes as fringe benefits, go to chapter F05 in your Practical tax loose Leaf
to get them all. Don't have one? Click here to get your copy.
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