Miss Katy Cat is the Financial Manager for the company Megabucks. She has been working there for two years. Megabucks buys new computers to replace all their old ones. They give Miss Cat an offer to purchase her old computer at 75% less than its market value.
The computer's current market value is R4000. So Miss Cat only has to pay R1000. Let's work out how to calculate the Vat
correctly on this fringe benefit.
Megabucks first need to calculate the cash equivalent on the benefit as follows:
R4 000 (current market value) – R 1 000 (amount paid) = R3 000.
R3 000 x 14/114 = R368.42.
Read on to see how Megabucks allocates this payment on the Vat
Your chances of being audited by SARS just increased…
A small administrative mistake is all it takes for SARS to schedule an audit for your business.
Putting a simple zero in the wrong place on the new VAT return could cause a long and tedious audit process that could cost your business thousands.
Make sure this never happens to you by filling in the new VAT return 100% correctly every, single time.
How Megabucks should treat the Vat on the fringe benefit
Megabucks calculated the Vat
to be R368.42. This amount is output tax
. Megabucks must pay this amount on the Vat
return which covers the period they gave the benefit to Miss Cat. The R368.42 goes into block 12 of the Vat
Keep looking out for my upcoming emails where I'll show you how to treat the Vat
on these remaining fringe benefits:
• Right of use of an asset;
• Free meals and refreshments;
• Free or cheap services; and
• Medical costs incurred by the employer.