Paragraph 2(e) of the Seventh Schedule to the
Income Tax Act
deems an employer to grant a taxable benefit to an employee if any service has,
at the expense of the employer, been rendered to the employee for his or her
private or domestic use.
The taxable benefit which arises in this
instance is valued under paragraph 10 of the Seventh Schedule and is included
in paragraph (i) of the definition of “gross income” and therefore subject to
The taxable benefit will further be included in the employee’s remuneration
and the employer will be obliged to withhold employees’ tax on these amounts.
Where an employer, that is engaged in the
business of conveying passengers for reward by sea or air, enables an employee
(or relative) to travel overseas for private or domestic purposes, the cash
value of the taxable benefit is an amount equal to the lowest fare less any
consideration payable by the employee or relative.
The cash value of a taxable benefit with
regards to the rendering of any other service is the cost to the employer in
rendering that service or having that service rendered.
These services may, therefore, be rendered by the employer or some other
Paragraph 10(2)(b) of the Seventh Schedule,
however, states that the taxable benefit will attract no value
transport service is rendered by the employer to its employees in general for
the conveyance of such employees from their homes to the place of their
employment (and vice versa
Some uncertainty existed as to the application
of the no-value provision. The South African Revenue Service (“SARS”) therefore
issued two binding general rulings under
section 89 of the Tax Administration Act
well as the recent Interpretation Note 111 to provide clarity on these issues.
In BGR 42 (issued on
22 March 2017) it was considered whether the word “homes” should be restricted
to the exact position of an employee’s specific dwelling or whether an employer
may arrange for
employees living within a certain radius to be collected from or dropped off at
a common area or central point between the employees’ homes and place of
In this regard, it was confirmed that the
no-value provision would apply to transport
services provided to employees to and from any collection or drop-off point en
to or from the employees’ homes and place of employment or any part
of that trip.
No 58 of 1962
Section 5(1) of the Income Tax Act.
Paragraph (b) of the definition of
“remuneration” in paragraph 1 of the Fourth Schedule.
Paragraph 2(1) of the Fourth
Paragraph 10(1)(a) of the Seventh
Paragraph 10(1)(b) of the Seventh
No 28 of 2011
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)