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Johannesburg - Do not expect a "free" Fifa World Cup ticket from your employer. You may well be taxed on it.
The Income Tax Act states that any fringe benefit granted by an
employer to employees is taxable, whether the benefit is given as part
of a remuneration package or as a reward.
Many popular World Cup-related "freebies" from employers are easy to quantify.
For example, say an employer presents an employee with an
original World Cup T-shirt and two tickets. Tickets may have been
acquired by the employer at around R140 a piece; and an original
T-shirt is sold for R1 300 - so the total cost of the fringe benefit
would be R1 580. Assuming that the individual falls within the 35%
marginal tax band, there would be R553 in tax payable on that gift.
The tax on this fringe benefit has to be accounted for on salary slips
at the end of the month, in addition to other pay-as-you-earn taxes
owed on normal remuneration.
"Many employers don't realise that the provision of these items
actually constitutes a fringe benefit and is subject to employees'
tax," said Vedika Andhee, tax director at Ernst & Young. "In many
circumstances those that are aware of the tax liability deliberately
choose to ignore it."
"A significant number of relatively large employers fall within this
category. This may constitute intentional tax evasion, the penalty for
which could be as high as 200% of the amount of tax payable, levied on
the employer."
Getting away with not declaring the fringe benefit is also easier said
that done. "It is very easy for the South African Revenue Service
(Sars) to check whether the employer has accounted for the fringe
benefits on the payroll," said Andhee.
In cases where employees participate in Soccer Fridays, where
individuals sport their T-shirts, Sars could become aware of this by
word of mouth or by anonymous tip-off.
Sars could also target the taxation of this benefit by sending out
random questionnaires to companies, or including this as a question
when conducting an employees' tax audit.
"One solution for employers is to consider picking up the tax
cost in relation to the awarding of these benefits," said Andhee.
"This, however, creates a rollercoaster effect, in that where an
employer picks up the tax cost, a further fringe benefit is created and
a full gross-up calculation will need to be performed."
- Fin24.com