Putting a zero in the wrong place on the new VAT Return could trigger your next SARS audit!
What is the right of use of an asset?
SARS says once you give your employee the right of use of any asset for private or domestic use, its a taxable benefit. This is any asset your company owns that you let your employee use!
And it includes assets you give your employee for free or for an amount less than the value of the use. But this excludes residential accommodation or any motor vehicle.
A common example of this fringe benefit is a company laptop!
Read on to see how to calculate Vat
on this fringe benefit.
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How to declare Vat on the right of use of an asset
Simply, take the amount the fringe benefit cost you and multiply it by the tax
fraction 14 /114. This will show you what amount of output tax
you owe SARS.
Let's say Company Q purchases a caravan and allows Mr J and his family to use it to go on holiday for 10 days. Mr J pays R50 a day to rent the caravan from company Q which amounts to R500.
Company Q has to pay Vat
on this R500 by applying the tax
fraction to it.
This is R500 x 14/114 = R61.40.
So Company Q must pay R61.40 output tax
That's all for this week!
Look out for my email next week where I'm talking about fringe benefit number six - medical costs for your employee that you incur.
If you think Vat
doesn't apply to your payroll, you're wrong! Learn how to avoid this common error and keep SARS away from your door at audit time with the Practical Vat Loose Leaf Service