Fringe benefits – Medical Costs incurred by an Employer

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Paragraph 2(j) of the 7th Schedule prescribes that a taxable benefit shall be deemed to have been granted where the employer, directly or indirectly, incurred any amount (other than a medical scheme contribution paid to a registered medical scheme) in respect of medical, dental and similar services, hospital services, nursing services or medicines provided to the employee, his / her spouse, child, relative or other dependant.

Value to be placed on the benefit in terms of Paragraph 12B of the 7th Schedule shall be the amount incurred by the employer (directly or indirectly) in respect of any medical, dental and similar services, hospital services, nursing services or medicines in respect of that employee, his / her spouse, child or other relative or dependants.

Appropriate portion cannot be attributed to the relevant employee: Where the payment is made in such a manner that an appropriate portion thereof cannot be attributed to the relevant employee and his / her spouse, children, relatives and dependants, the amount of that payment in relation to that employee and his / her spouse, children, relatives and dependants is deemed to be an amount equal to the total amount incurred by the employer during the relevant period in respect of all medical, dental and similar services, hospital services, nursing services or medicines for the benefit of all employees and their spouses, children, relatives and dependants divided by the number of employees who are entitled to make use of those services.

No value must be placed on any benefit —– resulting from the provision of medical treatment listed in any category of prescribed minimum benefits determined by the Minister of Health in terms of Section 67(1)(g) of the Medical Schemes Act No. 131 of 1998, which is provided to the employee or his / her spouse or children in terms of a scheme or programme of that employer —   – which constitutes the carrying on of the business of medical schemes if that scheme or programme is approved by the Registrar of Medical Schemes as being exempt from complying with the requirements of medical schemes; or – which does not constitute the carrying on of the business of medical schemes, if that employee and his / her spouse and children – are not beneficiaries of a medical scheme registered under the Medical Schemes Act no. 131 of 1998; or – are beneficiaries of such medical scheme and the total cost of that treatment is recovered from that medical scheme; – derived from an employer by—    – a person who by reason of superannuation, ill-health or other infirmity retired from the employ of that employer; – the dependants of a person after that person’s death, if that person was in the employ of that employer on the date of death; – the dependants of a person after that person’s death, if that person retired from the employ of that employer by reason of superannuation, ill-health or other infirmity; or an employee who is 65 years or older; or – where the services are rendered by the employer to its employees in general at their place of work for the better performance of their duties.

Employees’ tax — Employees’ tax must be deducted during the month in which the benefit accrues. IRP 5 — The information in respect of the taxable benefit must be reflected on the IRP 5 certificate under the following codes: 3813 — cash equivalent of the benefit (costs paid on behalf of the employee, irrespective if the expenses was in respect of immediate family or other relatives / dependants); 4024 — costs paid on behalf of the employee in respect of the employee, his / her spouse or child; and 4485 — costs paid on behalf of the employee in respect of other relatives or dependants of the employee.