How to calculate output tax on fringe benefit using the 14/114 formula
Use the fraction to calculate your output tax
on your fringe benefits.
Amount fringe benefit cost you
Tax fraction 14/114
Amount of output tax
you owe SARS.
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Now that you know how to calculate tax on fringe benefits, let's put the formula into action. Here's how to use it
Asset purchased at less than actual value
MK Quincy & Co, Attorneys practice, redecorates their offices. As part of this redecoration, they purchase new office furniture and allow the staff to purchase the old furniture at 90% less than market value. Mrs. X purchases the furniture from the reception area for R1 000.
Therefore, R1 000 x 14/114 = R122.80 output tax
payable to SARS
2. Free or cheap services
Wonder Skincare gives their staff free facials and cosmetics. At the end of the tax
period, they calculate the value of the free facials and cosmetics as R10 000.They must now pay output tax
on the R10 000 by applying the tax
fraction to the amount of R10 000.
So the output tax
payable will be R1 228.00 (R10 000 x14/114).
· EXCEPTION: Taxable fringe benefit that doesn't use this formula
calculation for company cars is completely different to other tax
calculations. You use 0.3% to do your calculations, as this is the separate valuation for cars (which you couldn't claim input tax
on) as per a regulation to the Vat
Act. For vehicles where you could claim the input tax
(e.g. single cab bakkie) you use 0.6% to do the calculation.
In your next Vat
return, remember to include the Vat
on the benefit (in block 12) in the month you awarded the fringe benefit.