Fringe benefits – Right of use of an asset

Paragraph 2(b) of the 7th Schedule prescribes that a taxable benefit shall be deemed to have been granted where an employee is granted the right of use of any asset (other than residential accommodation or any motor vehicle) for private or domestic purposes, either free of charge or for a consideration which is less than the value of such use.

Value to be placed on benefit in terms of Paragraph 6 of the 7th Schedule:- Where the employer is leasing / hiring the asset, the amount of the rental payable by the employer for the period the employee has the use of the asset.
– Where the employer owns the asset, an amount calculated for the period during which the employee has the use of the asset, at the rate of 15% per annum on the lesser of the cost of the asset to the employer and the market value of the asset at the date of commencement of the period. However, where the sole right of use of the asset for a period extending over the useful life of the asset or a major portion thereof, the value to be placed on the use of the asset shall be the cost thereof to the employer.

No value: Exemptions in respect of assets used for private or domestic purposes are applicable when one of the following criteria is met —
– The private use is incidental to the use of the asset for the employer’s business.
– The asset is provided by the employer as an amenity for recreational purposes for the use of his / her employees in general at his / her place of work.
– Any equipment or machine that the employer allows his / her employees in general to use from time to time for short periods where the value of the private use of the asset is negligible.
– Books, literature, recordings or works of art.

Employees’ tax — The cash equivalent of the benefit must be apportioned and is deemed to have accrued on a monthly or weekly basis during the year at the same intervals that the employee receives his / her cash remuneration, except in respect of those cases where the employee is granted the sole right of use of the asset during its useful life or a major portion thereof. As the latter benefit is deemed to accrue on the date on which he / she was first granted the right of use of such asset, employees’ tax must be deducted from the full value of the benefit during that specific month.
IRP 5 — The cash equivalent of the benefit must be reflected under code 3803 on the IRP 5 certificate.

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