According to The Practical Vat Loose Leaf Service, a fringe benefit is any taxable benefit or advantage granted to an employee by an employer in return for their employment or their holding an office.
Many Vat vendors make the mistake of discounting the effect of Vat on their payrolls, particularly as it relates to fringe benefits granted to employees and yet this is one of the first areas SARS auditors will target when auditing your Vat affairs.
Basically, 'where Vat is payable, the consideration for the supply of the fringe benefit is the cash equivalent of the fringe benefit as determined for income tax purposes,' explains the Loose Leaf.
Here are three fringe benefits that are subject to Vat
Remember, the cash equivalent of the value of the fringe benefit during the tax year must be included in the employee's gross income and should form part of his taxable income.
'To determine the amount of output tax to be accounted for, the employer must apply the tax fraction(x14/114) to the cash equivalent and this will determine the Vat amount on the value of the consideration,' explains the Loose Leaf.
Knowing which fringe benefits are subject to Vat will ensure you avoid making this common mistake so you don't get in trouble with SARS.