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Rewarded your employee for great service? Here's how to calculate output tax on the fringe benefit

by , 10 September 2014
Rewarding your employees in any way has Vat implications for you.

This means, if, for example, you rewarded your employee for great service, you must declare output tax to SARS on this fringe benefit. Failure to do this will result in penalties and interest.

Don't take that risk.

If you've rewarded your employee for great service, keep reading to find out how to calculate output tax on the fringe benefit so you can escape SARS penalties.


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Here's how to calculate output tax if you rewarded your employee for great service
 

The best way to explain how to calculate output tax on rewarding employees for great service is to provide a practical example.

Take a look at this example by the Practical Vat Loose Leaf Service

Let's say, Eric, your employee, is jetting off on an unforgettable long weekend away and you're paying. Instead of paying an incentive bonus, you decided to send Eric, the star salesman of the year, away on an all expenses-paid long weekend to Cape Town at the end of the month. Included in this long weekend are:
 
  • Business Class flights and shuttle transport;
  • Hotel accommodation for two at the five-star Beach Water Front Hotel;
  • All meals;
  • All drinks; and
  • Spending money.
 
The cost of the weekend away comes to R50 000.

Here's how to deal with output tax for this fringe benefit

You must pay output tax on the R50 000 value of the perk.

To calculate the output tax, you must use the tax fraction formula. Your calculation will look like this: R50 000 x 14/114 = R6 140.35. This means the output tax you must declare to SARS is R6 140.35.

You must include the Vat on the benefit of R6 140.35 in block 12 of your next Vat return in the month you awarded the fringe benefit to Eric. This goes for all your Vat calculations on fringe benefits.

It's that simple.

If you rewarded your employee for great service, calculate output tax on this fringe benefit so you can avoid SARS penalties.

Find out how to calculate Vat efficiently and take advantage of little known, legal, Vat saving strategies


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