HomeHome SearchSearch MenuMenu Our productsOur products

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.


*********** Recommended Product ************
 
12 Taxable fringe benefits - are you taking advantage of all of them?

There are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them...

This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!

Find out how to make sure every time you offer a fringe benefit to your employees you'll know if it's taxable or not and how to tax it correctly.

*************************************************
 

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




Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>