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Tax Talk

Tax Talk

Author: Natalie Wocke
Date: 2014-11-14
EMPLOYEES TAX AND FRINGE BENEFITS:

Free or Cheap Services:

A common oversight by many employers, which often comes to light only in a PAYE or Payroll audit when it is too late, is where an employer provides free or cheap services to an employee. Many of these should be subject to fringe benefits tax. To protect themselves, employers must remember that it is not only salaries that are subject to employee's tax, but also services provided to employees. An example of this is the provision of free or cheap services to employees, which are not specifically exempt from employee's tax.


A fringe benefit will arise when an employer grants to an employee, a service for the employee's private use. Generally, in order for the benefit to attract employees tax, the benefit should be provided to the employee free of charge, at a charge less than the lowest fare (e.g.: for provision of a travel service), or in other cases, the cost to the employer of providing the service to the employee - all less any consideration actually paid by the employee for the service. In most instances, the value of the service, less any consideration paid by an employee, should be added to the taxable income of the employee.


Employers are encouraged to communicate all benefits provided to their employees, in the form of cash, assets and services, to their payroll department. Where there is uncertainty as to the treatment of an item, it is advisable to obtain professional advice in advance, rather than discovering after the fact, that it should have been treated differently.


For advice on your specific payroll matters, contact Roberts and Chaplin. Branches in Ballito (032) 586 0387 and Umhlali (032) 947 1010.