Paragraph 2(a) of the 7th Schedule prescribes that a taxable benefit shall be deemed to have been granted if any asset consisting of any goods, commodity, marketable security or property of any nature (other than money) is acquired by an employee from the employer or any associated institution, for no consideration or for a consideration less than the value of the asset.
Value to be placed on the benefit in terms of Paragraph 5 of the 7th Schedule:
The value to be placed on the asset is the market value thereof at the time the employee acquired the asset.
However, where the asset is —
– movable property and the employer acquired the asset in order to dispose of it to the employee, the value to be placed on the asset is the cost thereof to the employer;
– trading stock of the employer, the value to be placed on the asset is the lower of the cost thereof to the employer or the market value;
– marketable securities, the value to be placed on the asset is the market value; and
– an asset which the employer had the right to use prior to acquiring ownership thereof (for example, a leased asset on which the employer had the right to acquire ownership at the end of the lease agreement), the value to be placed on the asset is the market value.
Reducing the value of the benefit: Where assets are presented to the employee as an award for bravery or for long service, the value determined is reduced by the lesser of the cost to the employer of all such assets so awarded to the relevant employee during the tax year and R5 000. For example, if the value of the asset is R5 600, only R600 will be taxable and reflected on the IRP 5 certificate.
No value: Assets (other than cash) disposed of to an employee in the following circumstances are not regarded as a taxable benefit —
Fuel or lubricants supplied for use in a motor vehicle where the private use of such vehicle is brought into account as a taxable benefit according to other provisions of the Schedule (in other words, a company vehicle).
Meals, refreshments, vouchers, board, fuel, power or water which are brought into account as taxable benefits according to other provisions of the Schedule.
Marketable securities acquired by the exercise by the employee of any right to acquire such marketable security, as is contemplated in Section 8A.
Employees’ Tax must be deducted in the month during which the employee acquires the asset. If the amount of Employees’ Tax to be deducted is excessive in relation to the employee’s remuneration for that month, the deduction of the tax in respect of the benefit may be spread over the balance of the tax year during which the benefit accrued to the employee.
Prizes given to an employee by an employer or any other person by arrangement with the employer, for sales performance, outstanding work, etc.
Benefits enjoyed by employees according to an agreement whereby employees are provided with credit cards and may purchase goods.
In cases where the employer arranges for the employee to acquire an asset from any other person at a discount, a benefit accrues to the employee.
The provision of security for the protection of the private home of an employee in the form of the installing of an alarm system, burglar bars or the provision of armed response.