Taxation 300: Fringe Benefits and VAT Treatment

Detailed vocabulary and calculation concepts for fringe benefits and their VAT implications based on the Taxation 300 curriculum at NUST.

Cash equivalent of the value of the benefit

The taxable amount under paragraph (i) of the "Gross Income" definition, calculated as the value of the benefit determined by the 7th Schedule minus any consideration paid by the employee.

Asset Value (7th Schedule Paragraph 5)

Generally the Market Value ($MV$) at the time of acquisition, the cost to the employer if acquired to dispose to the employee, or the lesser of cost price or $MV$ for trading stock.

Long service award valuation

For an asset presented after an initial $15$ years or subsequent $10$ years of service, the value is the cost to the employer reduced by the lesser of the cost or $R5\,000$.

Sundry Asset Right of Use Exclusions

Includes incidental private use of business assets, amenities at the workplace, telephone or computer services, and equipment used occasionally for short periods where private use value is negligible.

Determined Value (Motor Vehicle)

The original cost of the vehicle to the employer (including VAT) reduced by a $15\%$ depreciation on the reducing balance method for each completed $12$-month period the employer held the vehicle before granting the right of use.

Monthly Motor Vehicle Fringe Benefit

Calculated as the determined value of the vehicle multiplied by $3.5\%$ per month, or $3.25\%$ if the vehicle's cost included a maintenance plan.

Business KM Reduction

A deduction allowed if accurate logbook records are kept, calculated as: $Cash\,equivalent \times \frac{business\,km}{total\,km}$.

Tax-exempt Meals and Refreshments

Meals supplied in an employer-operated canteen, on the business premises, during business hours/special occasions, or while entertaining on behalf of the employer.

Remuneration Factor (A)

The remuneration earned by an employee during the immediately preceding year of assessment from the employer or associated institution, including $80\%$ of travel allowances but excluding company cars and residential accommodation.

Residential Accommodation Rental Value Formula

$(A - B) \times \frac{C}{100} \times \frac{D}{12}$, where A is the remuneration factor, B is the threshold ($R95\,750$ or $R0$ if the employee has interest), C is the furnishing factor ($17$, $18$, or $19$), and D is the number of months.

Exempt Free/Cheap Services

Includes employer-provided transport between home and work, recreational facilities at work, and telephone or computer services used mainly for the employer's business.

Official Interest Rate (Rand Loans)

Calculated as the South African repurchase rate plus $100$ basis points (e.g., $8.25\%$ in July $2024$).

Medical Aid Contribution Exclusion

Fringe benefits do not include contributions for employees who retired due to old age or ill-health, or for the dependents of a deceased employee.

VAT Value of Supply for Fringe Benefits

The cash equivalent of the fringe benefit multiplied by $\frac{15}{115}$, except for company cars.

VAT Exempt Fringe Benefits

Benefits that do not require output tax include residential accommodation, low-interest loans, medical/retirement fund contributions, and standard allowances (subsistence/travel).

VAT Value for Company Car

Calculated as the determined value (excluding VAT) multiplied by $0.3\%$ per month for a defined "motor car" or $0.6\%$ per month for all other cases (e.g., light delivery vans).