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The seven fringe benefits you didn't know about and how to declare Vat on each: Part 1 - company cars

by , 13 November 2014
When I present the Vat Masterclass, I always pick up the issues that frustrate vendors the most. One of the things that always comes up is Vat on fringe benefits. It's not new in Vat law, but still so incorrectly dealt with.

So I'm summarising all these issues for you over the next few weeks, so you can declare Vat correctly and avoid getting on the wrong side of SARS.

Most people think the only fringe benefit that affects Vat is the provision of company vehicles to staff. But there are actually seven in total you need to think about! These are:

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Seven fringe benefits you need to account for Vat on
 
  1. Company cars;
  2. Goods/services given to relatives of employees; 
  3. The purchase of an asset at less than actual value; 
  4. Right of use of an asset; 
  5. Free meals and refreshments; 
  6. Free or cheap services e.g. cosmetic and skin care groups that allow employees free facials; and
  7. Medical costs incurred by the employer. 
And you must calculate Vat on each of them. But remember, if the fringe benefit is at the zero rate or exempt for Vat purposes, then you shouldn't calculate any further output tax!
 
Now you know what a fringe benefit is, let's take a look at how to calculate deemed Vat on company cars correctly.
 
If you provide a company car to a staff member, you have to make a deemed output tax calculation as follows:
Cost price of car x 0.3% x 14/114 = output tax payable
 
You need to do this calculation every month, for every company vehicle that you provide.
 
Look out for my next email where I'll talk about fringe benefit number 2 – goods/services given to relatives of employees and how to deal with the Vat.
 
Dee Bezuidenhout
 
P.S. Get all the information you need to meet your Vat obligations with the Practical Vat Loose Leaf. Order now.
 

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