Fringe benefit taxation
In terms of the Seventh Schedule, the following fringe benefits which are provided to an employee or the holder of an office for a consideration less than the actual value or cost, give rise to a taxable benefit:
Kindly note that this is a broad summery of fringe benefit taxation,
- The acquisition of an asset
- Right of use of an asset (other than residential accommodation any motor vehicle)
- Meals, refreshments or vouchers for such
- Free or cheap services
- Use of residential accommodation*
- Interest – free or low – interest loans
- Housing loans or subsidies
- Payment of an employee’s debt or release from such obligation
- Private use of an employer – owned motor vehicle (company car)
- Value placed on private use of motor vehicle has been increased to 2.5% (from 1.8%) of the determined value of the motor vehicle
- Fuel cost paid by the employee for private use gets 0.22% relief
- Maintenance paid by the employee gets 0.18% relief
- There’s no relief if employee gets travel allowance
- Contributions to a medical aid scheme
In addition, certain other perks are also treated as a taxable benefit:
- Where the recipient is obliged to spend at least one night away from his/her usual place of residence on business and the accommodation to which that allowance or advance relates is in the Republic and the allowance or advance is paid or granted to pay for:
- Meals and incidental cost, one amount of R240 per day is deemed to have been expended
- Incidental costs only, an amount of R73.50 for each day is deemed to have been expended
- Travelling allowances not used for business travel
- Where the accommodation to which that allowance or advance relates is outside the Republic and that allowance or advance is paid or granted to defray the cost of meals and incidental cost, an amount equal to $215 per day This allowance only applies to continuous periods not exceeding 6 weeks away from home. There was a proposal for specific rates per foreign country and it is anticipated that these will be introduced 1 March 2009.
Official rate of interest
The official rate of interest, which changes from time to time, is used for the calculation of the fringe benefit where an employer provides a loan to an employee at a low rate of interest or interest free. No benefit is placed on a casual loan to an employee up to R3000 or a study loan to enable the employee to further his own studies.
From 1 September 2008 the effective rate is 13%.
The fringe benefit, which is the difference between the official rate and the charged, is subject to tax at the employee’s marginal rate of tax.