Fringe benefits are specifically included in the definition of remuneration and are therefore subject to PAYE.
The definition of fringe benefit is very wide and it includes any benefit that is granted in respect of employment (under paragraph g of the definition of gross income). It usually relates to benefits that an employee enjoys as a result of his/her employment.
1. If your company pays for your gym membership, it is considered to be a fringe benefit even though no money is paid to you. You will nevertheless be taxed on this.
2. Instead of giving you a performance bonus in cash at year end, your employer gives you a mountain bike to the value of N$50 000. This is a fringe benefit and is subject to tax.
3. You are allowed to use the company’s beach house at Langstrand one weekend every month at no cost. This is a fringe benefit.
4. Vouchers given to staff for good performance during the month is a fringe benefit and should be taxed.
5. If your company pays your children’s school fees on your behalf, this is considered to be a fringe benefit and the costs that they incur in paying is taxable in your hands.
6. If your employer sells an asset to you for an amount which is less than its market value, then the market value less the amount paid by you will become taxable in the your hands.
7. Using the company vehicle for private purposes (i.e. driving it on holidays/weekends or having the right to drive it from work to your home each day) will be subject to tax.
All of these are subject to taxation in your hands.
Your employer should deduct the relevant employees’ taxes on this and the value of the benefits should be disclosed on your annual PAYE5 certificate.
This is an important matter that often goes undetected in practice unless the correct questions are being asked. It is therefore crucial that you ensure that all your fringe benefits are taxed.
Johan Nel is a partner and director at PwC Namibia. This bi-monthly tax column is published on a Monday in Market Watch.