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Fringe benefit on cellphone replaced by an employer for his employee

28 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: An employee’s mobile phone is stolen in the workplace and the employee does not have the money to replace the phone; without the phone the director cannot get hold of the relevant person for work instructions. Can the employer buy a mobile phone for the employee due to the fact that the person’s mobile phone was stolen in the working area? If so is this a taxable fringe benefit? The phone is being used by the employee for business and personal use, however it is essential that the employee is available for business on this mobile also. The airtime is for the employee’s account. If the employer should wish to provide airtime to the employee from time to time on urgent after hours business cases, will this airtime be taxable also?

A: There are two possibilities.  

The first is that the employer bought the phone and it has been acquired by the employee from the employer.

In terms of paragraph 2(b) of the Seventh Schedule a taxable benefit is deemed to have been granted by an employer to his employee in respect of the employee’s employment with the employer, if as a benefit or advantage of or by virtue of such employment or as a reward for services rendered or to be rendered by the employee to the employer any asset consisting of any goods (other than money)  has been acquired by the employee from the employer or any associated institution in relation to the employer or from any person by arrangement with the employer, either for no consideration or for a consideration given by the employee which is less than the value of such asset.  

This will be a taxable benefit and the amount thereof is the market value of the phone.  

The second is where the employee has been granted the right to use any asset (the phone) for his or her private or domestic purposes.

In terms of paragraph 2(b) of the Seventh Schedule a taxable benefit is deemed to have been granted by an employer to his employee in respect of the employee’s employment with the employer, if as a benefit or advantage of or by virtue of such employment or as a reward for services rendered or to be rendered by the employee to the employer the employee has been granted the right to use any asset (other than any residential accommodation or household goods supplied with such accommodation) for his or her private or domestic purposes either free of charge or for a consideration payable by the employee which is less than the value of such use.  

The value is determined in terms of paragraph 6, but remember that paragraph 6(4)(bA) provides that no value shall be placed under this paragraph on the private or domestic use of an asset by an employee, if (bA) the asset consists of telephone or computer equipment which the employee uses mainly for the purposes of the employer’s business.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.



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