How do I value the right of use of accommodation where a timeshare is involved?
09 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: An employer owns a timeshare (at an exclusive
bush lodge), which was purchased a few years ago for a sizeable sum.Certain qualifying employees are given the use of this
timeshare. The employees reimburse the employer by paying a
"levy” cost for the period of use.
a) What is the correct methodology to be used to
calculate the "fringe benefit” value attributable to the employee?
b) What would SARS’ view be in the event of an
audit? Would this be open to attack/scrutiny if only the "levy” portion was
regarded as a taxable fringe benefit attributable to the Employee who had the
use of the timeshare?
My view would be that
the fringe benefit value would be the prevailing rate per day that such
accommodation is let to any unconnected person.
Should the employee reimburse the employer for any
amounts (e.g. levy for that period occupation) that amount would need to be deducted from
the determined fringe benefit.
A: The value of the benefit in this instanced is
determined under paragraph 9(4) of the Fourth Schedule to the Income Tax
Act. It reads as follows:
The rental value to
be placed on accommodation occupied temporarily for the purposes of a holiday
a) where such accommodation is hired by the
employer from a person other than an associated institution in relation to the
employer, so much of the rental payable and any amounts chargeable in respect
of meals, refreshments or any services relating to such accommodation as have
been borne by the employer and are connected with the period during which the
accommodation was so occupied; or
b) in any other case, an amount calculated at the
prevailing rate per day at which such accommodation could normally be let to
any person who is not an employee of the employer or of any associated
institution in relation to the employer.
Using the ‘levy
portion’ only would not be in terms of the law. The parties will have to
obtain a prevailing rate per day as is required by the above-mentioned
paragraph. You are correct that
the amount of the benefit is reduced by the amount paid by the employee.
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