A fringe benefit is a non-cash advantage an employer provides to an employee - such as the use of a company car, a low-interest or interest-free loan, or free or subsidised accommodation - that SARS treats as part of taxable income even though no cash changes hands.
What it means
Without taxing fringe benefits, employers could reward employees with valuable perks that escape PAYE entirely simply because they aren't paid in cash. SARS instead prescribes a method for valuing each type of benefit, and that value is added to taxable income exactly as if it were cash earnings.
Where it fits in
The prescribed value is calculated each pay period the benefit is enjoyed and included in gross remuneration for PAYE purposes, even though the employee never receives that amount as cash. It is reported under its own source code on the IRP5 so SARS can distinguish it from cash earnings.
Key rules
- Valued using SARS-prescribed formulas specific to each benefit type (company car, loan, accommodation, and others).
- Added to taxable income for PAYE even though no cash is paid to the employee for that amount.
- Reported under its own source code on the IRP5, separate from cash remuneration.
- Incorrect valuation of a fringe benefit is a common cause of PAYE under-deduction findings on audit.
