Are Long Service Awards Taxable in South Africa

The Budget 2021 review proposes that paragraph 5(2)(b) of the Seventh Schedule to the Income Tax Act be expanded to reflect the range of non-material long-term services that employers provide to employees who have served the longest. 8. Employee subsidies are also taxable Employers and employees should take note of significant new changes regarding personal income tax brackets, long-term service bonuses as an ancillary benefit, abuse of tax incentives for employment and changes in the tax treatment of pension funds. One of the most important proposals for the 2021/22 financial year is to increase income tax brackets and rebates by 5%, which is well above inflation. According to the Minister, this proposal will provide tax relief of ZAR 2.2 billion by ensuring that inflation does not automatically increase the individual tax burden and is aimed primarily at low- and middle-income households. In other words, if a person earns above the new tax exemption threshold of ZAR 87,300, they will have an additional ZAR 756 in their pocket after March 1, 2021. Of course, this adjustment will reduce tax revenues by ZAR 2.2 billion, which the minister says will be offset by a corresponding increase in excise duties on tobacco and alcohol. In addition, Budget 2021 includes the following policy proposals regarding individuals, employment and savings: Type of benefit bonuses to be reviewedAn employer currently has the right to treat a long-term designation of an employee (in cash or as an asset) valued at ZAR 5,000 as a worthless marginal benefit. However, employers recognize long service through bonuses in various forms that could be considered benefits in kind within the meaning of the Income Tax Act, and it is proposed to review the current provisions of the Act to consider other bonuses within the same limit granted to employees as rewards for service to others. The employment tax incentive (ETI) aims to reduce the cost of hiring young people aged 18 to 29, allowing employers to reduce their PAYE obligation to SARS during the first two years they employ skilled workers with a monthly allowance of ZAR 6,500 or less.

Some taxpayers use educational institutions to claim the EIT for students who never work for the employer. To curb abuse, the definition of “employee” in the Employment Tax Incentives Act is amended to stipulate that work must be performed under a contract of employment that complies with the record-keeping provisions of the Basic Terms and Conditions of Employment Act. This amendment will come into force on March 1, 2021. Budget 2021 also proposes the following changes with respect to pensions. To increase flexibility for a departing member who can receive a retirement pension who can receive a retirement pension who can receive a retirement pension that must be provided with the member`s retirement interest balance after conversion, it is proposed that the amount of retirement interest that can be used to purchase pensions either increase. Currently, the pension fund can provide the pension by paying it directly to the member or by purchasing it from an insurer registered in South Africa on behalf of the fund or on behalf of the outgoing member. If a member chooses to receive a pension, the total value of his or her retirement interest after conversion must be used to grant one of the above pensions. 5. Free accommodation for employees is taxable. The value is determined by the greater of the cost to the employer or the amount determined when the SARS formula is applied.

To calculate the rental value of a holiday accommodation for staff, it is recommended to use the applicable price per day. Also note that rent-free housing for employees who work from home is exempt from tax. Are vouchers taxable? If not, how do I declare the voucher in payroll? (The voucher comes from only one supplier) 7. Low-content or interest-free loans are also taxable. If you make a loan to an employee and no interest is payable on the loan or interest is payable at an interest rate lower than the official interest rate, this is a taxable marginal benefit. It is assumed that a portion of the taxable benefit accrues each day of the year your employee pays interest on the loan at regular intervals Recognizing the employee by an employer can be an important motivator and have a positive effect on an employee`s desire to stay in the company or organization. Most employer bonuses granted to an employee may be treated as taxable income under ITEPA 2003, Article 62 or as a benefit under ITEPA 2003, Article 201 because they are granted as a `reward` on the basis of employment […].

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