Do you know how to calculate output tax on a fringe benefit?

43984, 09 Sep. 2014

Tags: fringe benefits, sars

A fringe benefit is a perk your company gives employees for performing a service.
In terms of Vat law, rewarding your employees in any way or form has Vat implications for you. This means you must declare output tax to SARS on any fringe benefits you award. If you don’t, SARS will assess you and charge you with penalties and interest.
What’s worse, it’ll calculate penalties and interest all the way back to when you first made the mistake – this means you could lose a lot of money.
To avoid this happening to your company, read on to find out how to calculate output tax on a fringe benefit.
Here’s how to calculate output tax on a fringe benefit
To calculate output tax, simply take the amount the fringe benefit cost you and multiply it by the tax fraction 14 /114. This will show you what amount of output tax you owe SARS.
Then you must declare the output tax amount on your Vat return (in the month you awarded the benefit) in block 12.
It’s that simple.
Now that you know how to make your calculation, take a look at some of the fringe benefits you must calculate output tax on:
  • Rewarding employees for a great service;
  • Goods/services you give to relatives of employees;
  • Buying an asset at less than actual value;
  • The right to use of an asset;
  • Giving free meals and refreshments to staff;
  • Giving free or cheap services to employees;
  • Medical costs you incur as the employer; and
  • Giving employees company cars.
If you fail to declare output tax on these fringe benefits, SARS will charge you penalties and interest. So calculate output tax on fringe benefits now that you know how to do the calculation.

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