Page 615 - SAIT Compendium 2016 Volume2

IN 71 Income Tax acT: InTeRPReTaTIon noTes IN 71
Example 3 – Gift vouchers
Facts:
ABC (Pty) Ltd awarded an employee, P, three gift vouchers in recognition of 15 years continuous service with the company. The gift vouchers awarded included the following:
A gift voucher for dinner at South Africa’s top restaurant, Zoo-Zoo Cuisine. The voucher is for two people to a maximum of R850. ABC (Pty) Ltd frequently takes clients to Zoo-Zoo Cuisine and gets a 10% discount; as a result the voucher cost ABC (Pty) Ltd R765.
A gift voucher for a facial and manicure at the local spa. This voucher cost ABC (Pty) Ltd R750. A music store voucher which cost ABC (Pty) Ltd R250.
ABC (Pty) Ltd was concerned that P might forget to use the vouchers before they expire so to ensure the vouchers are used P was asked to pay ABC (Pty) Ltd R100 per voucher.
Result:
The Zoo-Zoo Cuisine gift voucher is a voucher for a meal and is speci cally excluded from paragraph 2 (a). It is dealt with under paragraph 2 (c).
Value of the taxable bene t:
R Value of the Zoo-Zoo voucher is the cost to ABC (Pty) Ltd [paragraph 8(2)] 765 Less consideration given (100) Cash equivalent of the taxable bene t 665
The spa gift voucher and the music store voucher fall within the scope of paragraph 2 (a) as P acquires them at less than actual value.
Value of the voucher:
Cost to ABC (Pty) Ltd (R750 spa voucher and R250 music store voucher) Long service award reduction (cost of the two long service assets awarded in year is less than R5 000)
Value of the vouchers
Value of the taxable bene t:
Value of the vouchers
Less consideration (R100 for each voucher)
Cash equivalent of the taxable bene t (can never be less than Rnil)
P will have to include R665 (R665 + Rnil) in gross income.
R
1 000
(1000) Nil
Nil (200) Nil
4.6 Employees’ tax
Taxable bene ts are included in ‘remuneration’ in the Fourth Schedule to the Act and are subject to the deduction of employees’ tax. In the month the employer gives the employee the long service award, the cash equivalent of the taxable bene t must be included in remuneration. Taxable long service awards must be re ected on the employee’s IRP5 or IT3(a) certi cate under code 3801.
5. Conclusion
The awarding of an asset by an employer to an employee in recognition of the employee’s long service is a taxable bene t. Gift vouchers are assets, but a gift voucher for a meal is speci cally excluded from paragraph 2 (a) because it is dealt with in paragraph 2 (c) or (d) (the latter paragraphs are not covered in this Note).The cash equivalent of the value of the taxable bene t arising from the acquisition of an asset is equal to the value of the asset less any consideration paid by the employee for the asset.
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 607