Employer-provided home internet taxable
They say ‘work is not a place you go to but a thing you do,’ meaning that anyone can work from anywhere. It seems the COVID-19 pandemic has proven this notion to be true. Undoubtedly, what we used to view as abnormal has been normalised by the pandemic.
Companies are forced to device new means of ensuring that operations remain afloat by having employees to work remotely from home. This is to ensure that disruption of work is minimised as well as taking the safety of employees into consideration. Consequently, employers have to carry the burden of paying for internet services so that their employees are able to discharge their duties from home.
However, such arrangements brought along tax contentions, specifically in the hands of the employees. Today’s article seeks to analyse and clarify the tax treatment of internet usage by employees working from home.
The new normal
As we highlighted above, companies are forced to strike a balance of ensuring that the most valuable asset i.e., the employee is safe at the same time, ensuring that work is not disrupted by social distancing.
Some employers now provide employees with internet at home to enable them to deliver whilst social distancing at the same time.
However, just like any other arrangement, employer-provided internet has its technicalities, from a tax angle. The main contentious issue brought by this kind of working is the veiled internet benefit enjoyed by employees that apparently triggers PAYE. Most employers argue that the internet they provide to employees is strictly for work purposes and consequently, there is no taxable employee benefit. Let us have a look at whether such arrangements result in a taxable benefit.
The benefit
Technically, a benefit exists where there is a link between an expenditure paid by an employer and the rendering of employment services by employees. The test as to whether or not a benefit exists lies on the personal usage or private enjoyment of an advantage by an employee at the expense of the employer.
Additionally, a benefit or advantage is assessed in the hands of the employee to the extent that it is utilised for personal use. Now, looking at our remote working arrangement where employers pay for home internet for employees, it is practically impossible for an employee to utilise 100% of the internet on business transactions.
By default, employees will enjoy free usage such as accessing social sites like WhatsApp, Facebook, YouTube, or general browsing on the internet. Accordingly, a benefit accrues on that portion of the internet utilised for personal or private use.
Enter PAYE
The Income Tax Act makes it axiomatic that taxable employment income includes ‘the value of any other benefit or advantage granted to an employee in respect of his or her employment.’
The employee is only able to have home internet access by virtue of being employed and this creates a taxable benefit or advantage on the portion of the internet used for personal gratification.
Despite the difficulty of assigning a private value to the internet benefit, employers should make an analysis of the business and private internet use by employees and tax the private portion. To avoid or reduce conflicts with BURS, an employer should have an internet policy in place which stipulates what is regarded as the business and private internet usage.
A sound policy should specify usage by work or activities required of an employee. For instance, you would expect a research analyst to consume more internet than a data capturing cleck.
Conclusion
The Income Tax Act requires employers to ensure that PAYE is correctly collected from employees. As such, it is the employer’s responsibility to assess and ensure that PAYE attributable to the private use of internet is collected and paid to BURS.
Contacts: You may contact us at Aupracon Tax Specialists: +267 7181 5836 or +267 393 9435 or jhore@aupracontax.co.bw. This article is of a general nature and tax advice is recommended if decisions are to be made.