Treat­ment of fringe ben­e­fits un­der In­come Tax, VAT Acts

The Manica Post - - Business -

THIS ar­ti­cle seeks to clar­ify this is­sue for the ben­e­fit of our val­ued clients. Some of the fringe ben­e­fits en­joyed by em­ploy­ees as part of re­mu­ner­a­tion are tax­able un­der Em­ploy­ees Tax (PAYE) and Value Added Tax (VAT) le­gal pro­vi­sions. The In­come Tax Act (Chap­ter 23:06) states that ev­ery em­ployer who pays or be­comes li­able to pay any amount by way of re­mu­ner­a­tion to any em­ployee is re­quired to with­hold Em­ploy­ees Tax (PAYE).

The term “re­mu­ner­a­tion” cov­ers a num­ber of as­pects which may be paid by the em­ployer to any em­ployee and in­cludes; any amount of in­come re­ceived by an em­ployee by way of salary, leave pay, al­lowance, wage, over­time pay, ben­e­fits or ad­van­tages, whether in cash or oth­er­wise. The fore­go­ing cited ex­am­ples are not there­fore ex­haus­tive.

The def­i­ni­tion of re­mu­ner­a­tion also in­cludes amounts re­ceived as:

◆ An­nu­ity

◆ for ser­vices ren­dered.

◆ on with­drawal from or wind­ing up of a ben­e­fit, pen­sion or un­ap­proved fund.

◆ an amount equal to the value of an ad­van­tage or ben­e­fit in re­spect of em­ploy­ment, ser­vice, of­fice or other gain­ful oc­cu­pa­tion or in con­nec­tion with the tak­ing up or ter­mi­na­tion of em­ploy­ment, ser­vice, of­fice or other gain­ful oc­cu­pa­tion.

What are some of the com­mon ex­am­ples of fringe ben­e­fits paid or granted by em­ploy­ers to em­ploy­ees?

◆ Com­pany mo­tor ve­hi­cle, house­boats, se­cu­rity, cell­phone al­lowance, air­time, meals, can­teen meals, park­ing fees, DStv sub­scrip­tions, golf sub­scrip­tions, fuel, ac­com­mo­da­tion, ed­u­ca­tional as­sis­tance, school fees, hol­i­days and oth­ers are some of the ex­am­ples.

Are all tax­able ben­e­fits payable to em­ploy­ees by em­ployer de­ductible for In­come Tax pur­poses?

Not all amounts paid by an em­ployer in re­spect of ben­e­fits or ad­van­tages can be claimed as de­duc­tions for in­come tax pur­poses. Sec­tion 16 of the In­come Tax Act pro­vides for cer­tain ex­penses that are not de­ductible for in­come tax pur­poses. One such ex­am­ple is en­ter­tain­ment ex­penses or amounts ex­pended in re­spect of hospi­tal­ity in any form. Ex­penses in­curred for staff meals or can­teen meals are not al­low­able for in­come tax pur­poses. Such amounts are there­fore tax­able for PAYE pur­poses but not al­lowed as de­duc­tions for in­come tax pur­poses.

What are the ex­am­ples of fringe ben­e­fits and their treat­ment in terms of the VAT Act?

Sup­plies on which out­put tax must be ac­counted in­clude:

◆ The sup­ply of a mo­tor ve­hi­cle.

◆ The sup­ply di­rectly or in di­rectly of se­cu­rity ben­e­fit.

◆ The sup­ply of cell phone al­lowance ben­e­fit (Air­time, Data bun­dles, In­ter­net Fa­cil­ity)

◆ Park­ing fees

◆ The pro­vi­sion of can­teen meals.

◆ Sub­scrip­tions for DSTV, Sub­scrip­tions to golf clubs

Sup­plies of fringe ben­e­fits, which are ex­empt in terms the VAT Act

◆ The sup­ply of any ac­com­mo­da­tion in a dwelling

◆ The sup­ply of any ed­u­ca­tional ser­vices.

◆ School fees al­lowance/ben­e­fit

The ex­am­ples given above are not ex­haus­tive and de­pend on the con­tracts of em­ploy­ment en­tered into by the em­ployer and em­ployee. Our val­ued clients are there­fore urged to seek clar­i­fi­ca­tion or in­for­ma­tion on the cor­rect tax treat­ment of pe­cu­liar ben­e­fits or ad­van­tages at their near­est ZIMRA of­fices or us­age of the com­mu­ni­ca­tion chan­nels and means sup­plied be­low.

Dis­claimer: This ar­ti­cle was com­piled by the Zimbabwe Rev­enue Au­thor­ity for in­for­ma­tion pur­poses only. ZIMRA shall not ac­cept re­spon­si­bil­ity for loss or dam­age aris­ing from use of ma­te­rial in this ar­ti­cle and no li­a­bil­ity will at­tach to the Zimbabwe Rev­enue Au­thor­ity. To con­tact ZIMRA: What­sApp line: +263 782 729 862 Visit our web­site : www. Fol­low us on Twit­ter: @ Zim­ra_11 Like us on Face­book: www.face­ Send us an e-mail:­mas­ Call us (Head Of­fice): 04-758891/5; 790813; 790814; 781345; 751624; 752731

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