How does SARS define a fringe benefit?
Fringe benefits have Vat implications for your company. To file the tax on them correctly, you need to know what they are. Today, we look at the four elements of fringe benefit.
Fringe benefits are perks you give to employees for performance or service.
They carry Vat implications for your company. These could come back to bite you, if not dealt with correctly. Knowing the four elements of a fringe benefit will help you file your Vat correctly. Read on below to find out more about them
SARS' four elements of a fringe benefit
1. There must be an employment relationship between the person giving the benefit and the person receiving it.
The Practical Vat Loose Leaf Service
uses the example of Stander v CIR (59 SATC 212). In this case, the taxpayer won an overseas trip for himself and his wife for being one of the top five accountants of certain franchise dealers. A supplier of the taxpayer's employer made the award. The court held that the trip couldn't be said to have been given 'for services rendered' as the taxpayer hadn't rendered services to the supplier that awarded the prize. Rather, he had rendered services to his employer. The court held there was no employer/employee relationship between the taxpayer and the supplier, and the fact that his services happened to be of benefit to the franchise dealer didn't in itself mean the award was for services rendered.
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2. The benefit accrues to the employee because of his employment (i.e. it's a perk of his job).
3. The benefit must be a reward for services rendered (or to be rendered) by the employee.
4. The benefit is taxed, even if it was granted by an associated institution, rather than the employer
Failing to account for the Vat on fridge benefits is a punishable offence. You could face penalties and pay interest. If SARS finds you in the wrong, the interest it charges you backdates all the way to when you made the mistake. Now that you know the elements of fringe benefits, it will be a breeze to identify fringe benefits.