Fringe benefits are employment benefits that have a monetary value but do not affect basic wage rates. SARS defines a fringe benefit in the seventh schedule as having four elements i.e.
- There’s an employment relationship;
- The benefit accrues to the employee as a result of this relationship;
- The benefit is a reward for services rendered;
- The benefit is taxed.
Below we look at the different categories of fringe benefits:
- Acquisition of an asset at less than the actual value: A taxable benefit is deemed to have been granted if any asset is acquired by an employee from the employer, any associated institution or from any person by arrangement with the employer, for no consideration or for a consideration less than the value of the asset.
- Long service awards: Where assets are presented to the employee as an award for a long service.
- Right of use of an asset: A taxable benefit is deemed to have been granted where an employee is granted the right of use of any asset for private or domestic purposes, either free of charge or for a consideration which is less than the value of such use.
- Right of use of a motor vehicle: A taxable benefit is deemed to be granted where employee is granted the right of use of any motor vehicle for private or domestic purposes.
- Meals, refreshments and meal and refreshment vouchers: A taxable benefit is deemed to have been granted where the employee has been provided with any meal or refreshment or voucher entitling him/her to any meal or refreshment, either free of charge or for a consideration which is less than the value of such meal, refreshment, or voucher.
- Accommodation: A taxable benefit is deemed to have been granted where the employer has provided the employee with residential accommodation either free of charge or for a rental consideration which is less than the value of such accommodation.
- Free or Cheap Services: A taxable benefit is deemed to have been granted if any service has at the expense of employer been rendered to employee and that service has been utilized by employee for his/her private or domestic purposes and no consideration or an inadequate consideration has been given by the employee.
- Low interest or interest free debt: A taxable benefit is deemed to have been granted if a debt, whether in favour of the employer or in favour of any other person by arrangement with the employer or any associated institution in relation to the employer and either no interest is payable by the employee or interest is payable at a lower interest rate in comparison to the official rate of interest.
- Subsidies in respect of debt: A taxable benefit is deemed to have been granted if the employer has paid any subsidy in respect of the amount of interest or capital repayments payable by the employee in terms of any debt.
- Employer contributions to insurance policies schemes: Any direct or indirect contribution by an employer to an insurer in respect of insurance benefits for the benefit of an employee, his spouse, children, dependent or nominee will constitute a taxable fringe benefit in the employees’ hands.
- Employee’s debt or release from obligation to pay debt: A taxable benefit is deemed to have been granted if employer has paid an amount owing by employee to a third party, whether directly or indirectly, without requiring employee to make any payment for amount paid.
- Medical scheme contributions paid by an employer: A taxable benefit is deemed to have been granted where the employer contributes directly or indirectly to a medical scheme on behalf of an employee and his/her dependants. No value shall be placed on the benefit, if the payment by the employer is made on behalf of a pensioner or the dependents of a pensioner after the death of the pensioner, or the dependents of a deceased employee after such employee’s death.
- Medical costs incurred by an employer: A taxable benefit is deemed to have been granted where the employer, directly or indirectly, incurred any amount (other than a medical scheme contribution) in respect of medical services or medicines provided to the employee and their dependents.
- Benefits granted to relatives of employees and others: Employee is deemed to be granted a taxable benefit if employer has granted a benefit or advantage directly or indirectly to a relative of the employee.
- Valuation of contributions made by employers to pension or provident fund: An employee is deemed to have been granted a taxable benefit if the employer has made contributions or paid any amount to the pension, provident fund, or retirement annuity on behalf of the employee.
- Valuation of contributions made by employers to bargaining council: An employee is deemed to have been granted a taxable benefit by his/her employer if the employer has made contributions to the Bargaining Council.
