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Employer-provided residential accommodation: Determine the fringe benefit value

Thursday, 06 March 2014   (0 Comments)
Posted by: Author: Nicole Paulsen
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Author: Nicole Paulsen (DLA Cliffe Dekker Hofmeyr)

Where an employer provides its employee with residential accommodation, either free of charge or for a rental consideration payable by the employee, which is less than the rental value of such accommodation, a taxable benefit is deemed to have been granted by the employer to his employee.

The value of the taxable benefit for the employer-provided accommodation is determined in relation to the 'rental value' representing the value of the use of the accommodation. Currently, the rental value is calculated according to the specific formula contained in paragraph 9(3) of the Seventh Schedule to the Income Tax Act, No 58 of 1962 (Act), otherwise referred to as the 'remuneration proxy' and the period that the employee used the accommodation. Alternatively, the 'rental value' can also be calculated by taking into account the aggregate of the total rentals payable and other associated costs or the portion of the accommodation costs borne by the employer that pertains to the use by the employee. 

However, the Minister has proposed in the 2014 Budget Speech that the method of valuation of the fringe benefit resulting from employer-provided accommodation be reviewed so that the rental value is no longer determined in accordance with a specific formula or varying circumstances but that the 'rental value' is determined with reference to the actual market value of the use of the accommodation.

In this regard it is important to note the effect of the proposals made by the Minister, namely:

  • Firstly, where the employer rents accommodation from an unconnected third party, it is proposed that the value of the taxable benefit should be the cost to the employer in providing the accommodation; and
  • Secondly, the Seventh Schedule to the Act currently does not make provision for the apportionment where employees share employer-provided accommodation.

The Minister therefore proposes that some form of apportionment be considered where one has to determine the taxable benefit in instances where employees have to share the employer-provided accommodation.

This article first appeared on 



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