Fringe Benefits – general obligation of employer

Paragraph 4 of the 7th Schedule prescribes that where any associated institution in relation to any employer grants a benefit to an employee as a reward for services rendered, it constitutes a taxable benefit deemed to be granted by the employer to the employee.

Paragraph 3 of the 7th Schedule prescribes that an obligation is placed upon the employer to determine the cash equivalent of the value of a taxable benefit. SARS may, on assessment for normal tax, re-determine the cash equivalent of the taxable benefit if it is considered that the determination is incorrect. If any employee is dissatisfied with the determination by his / her employer, SARS may consider the matter and if necessary, issue a directive.

Paragraph 17 of the 7th Schedule prescribes that every employer must deliver an IRP 5 certificate to the employee. The nature of the taxable benefit and the cash equivalent of the value thereof must be reflected on the IRP 5 certificate. Where the employer fails to comply with this requirement, a penalty equal to 10% of the cash equivalent of the value of the taxable benefit or 10% of the amount by which the cash equivalent is understated may be imposed.

Paragraph 18 of the 7th Schedule prescribes that the employer must declare that all taxable benefits enjoyed by their employees are included in the employees’ tax certificate issued to employees. This declaration forms part of the IRP 501 reconciliation statement that must be submitted annually by all employers.