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'1-4-1-1-4': The most important numbers you'll need for your fringe benefits tax calculation

by , 03 July 2015
There is a special formula to calculate tax on fringe benefits correctly. The secret lies in the fraction of 14/114. Read on to find out how to use it.

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.
 
The formula:
 
Amount fringe benefit cost you
 
                                X
 
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

 
The Vat 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. 


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