ZA SECONDARY CLASSIFICATION GENERAL FRINGE BENEFITS (Doc ID 2332383.1)

Last updated on MARCH 14, 2022

Applies to:

Symptoms

Problem Statement:

In terms of Paragraph 2(e), and more specifically Paragraph 2(k) of the Seventh Schedule to the Income Tax Act No.58 of 1962 (as amended), where an employer has made a payment to any insurer under a policy of insurance directly or indirectly for the benefit of an employee, spouse, child, dependent or nominee, such payment will give rise to a taxable benefit in the hands of an employee. Note that the aforementioned provisions will not apply if the cost of the insurance policy relates to an event that arises solely out of and during the course of employment.

The value of the taxable fringe benefit is equal to the cost of the premium paid by the employer for that specific employee. If the employer is unable to determine the amount attributable to the employee for whose benefit the premium was paid then the taxable fringe benefit shall be determined as follows: Total cost incurred by the employer during the year of assessment divided by number of employees in respect of whom the expenditure was incurred.

The taxable fringe benefit must be disclosed under Code 3801 (General Fringe Benefits) on an Income Tax Certificate {IRP5/IT3(a)}.

Currently, certain employers disclose the above taxable fringe benefit under Code 3808 (Payment of Employee Debt). However, if the fringe benefit falls within the parameters of the above mentioned provisions, it should be disclosed under Code 3801.

In this regard, a new secondary classification called General Fringe Benefits that feeds to Code 3801 will need to be created.

Cause

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