Fringe benefits – Free or cheap services

Paragraph 2(e) of the 7th Schedule prescribes that a taxable benefit shall be deemed to have been granted if any service has at the expense of the employer been rendered to the employee (whether by the employer or by some other person) and that service has been utilised by the employee for his / her private or domestic purposes and no consideration or an inadequate consideration has been given by the employee.

Value to be placed on the benefit in terms of Paragraph 10 of the 7th Schedule shall be —In the case of any travel facility granted by an employer engaged in the business of conveying passengers for reward by sea or air, to enable any employee or his / her relative to travel to any destination outside the Republic for private purposes, an amount equal to the lowest fare payable by any passenger utilising such facility less any amount paid by the employee or his / her relative. For this purpose, the forward and return journey is regarded as one journey.

In the case of rendering of any other service, the cost to the employer in rendering such service or having such service rendered, less any amount paid by the employee.

Example: If an educational institution such as a university or technikon provides free or cheap tuition to the children of personnel, a taxable benefit arises. The value that must be placed on the benefit is the marginal cost involved in the tuition of the additional person. If the employee makes a contribution that is equal to or more than the marginal cost, no taxable benefit accrues.

No value shall be placed on —- Any travel facility granted by an employer engaged in the business of conveying passengers for reward by land, sea or air, to enable any employee, his / her spouse or minor children to travel —
– to any destination in the Republic or to travel overland to any destination outside the Republic; or
– to any destination outside the Republic if such travel was undertaken on a flight or voyage made in the ordinary course of the employer’s business and such employee, spouse, or minor child was not permitted to make a firm advance reservation of the seat or berth occupied by him / her.
– Any transport service rendered to employees in general for the conveyance of such employees from their home to the place of their employment and vice versa.
– Services rendered to employees at their place of work
– for better performance of their duties,
– as a benefit to be enjoyed by them at their place of work, or
– for recreational purposes at work or a place of recreation, other than at the place of work that is for the use of employees in general.
– The provision of parking for motor vehicles of personnel at their place of work is not a taxable benefit.
– Any travel facility granted by an employer to the spouse or minor child of the employee if:
– The employee is for the duration of his / her employment stationed for purposes of the employer’s business at a specific place in the Republic further than 250 kilometres away from his / her main place of residence where he / she ordinarily resides;
– The employee is required to spend more than 183 days during the tax year at that specific place; and
– Such a facility is granted in respect of travel between the employee’s main place of residence where he / she ordinarily resides and that specific place where the employee is so stationed.

Employees’ tax — Employees’ tax must be deducted from the cash equivalent of the benefit.

IRP 5 — The cash equivalent of the benefit must be reflected under code 3806 on the IRP 5 certificate.

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