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Understanding Fringe Benefit Tax

Understanding Fringe Benefit Tax

Last Updated: 06 June, 2022 - Print

What is Fringe Benefit Tax?

Fringe Benefit Tax (FBT) is tax paid on the taxable values of fringe benefits being provided by an employer to an employee. All employers except the government are liable to FBT. The employer is liable for payment of FBT.

What is a Fringe Benefit?

With regard to employer employee relationship, fringe benefit means any asset, service or other benefit in kind, provided by or on behalf of an employer to an employee, if such provision includes an element of personal benefit to the employee.  For example, if a company pays school fees for an employee’s children, provision of accommodation and concessionary loans.

Who is eligible for FBT?

Every employer other than the government, providing fringe benefits to employees is required to operate FBT. An employee would also include a director.
To register, an employer fills form FBT 1 and gets FORM FBT 2 for remittance.
The rate for Fringe Benefit Tax is 30%.
Any employer who gives fringe benefits to   the employees should register for FBT 14 days after starting giving fringe benefits to employees.

Does FBT apply on personal loans?

If an employer gives a loan to an employee to purchase a car, house or furniture etc and charges interest whose rate is lower than the commercial lending rate, say 15% instead of 22%, the difference (7%) is treated as benefit and therefore subject to FBT.
However, education loan, a house loan or an emergency advance obtained to cover medical or funeral expenses do not constitute a personal loan and therefore not liable to FBT.

When and where should FBT be paid?

Fringe Benefit Tax is paid quarterly and is due within 14 days from the end of each quarter. FBT should be remitted to any MRA Domestic Taxes office nearer to the taxpayer.

What are the penalties for failure to   remit or register for FBT?

Any employer who fails to register or delays or fails to pay Fringe Benefit Tax shall, in addition to the amount due, be liable to a penalty of 20 % of the tax due.
As stated above, any employer who gives fringe benefits to his or her employees should register for FBT 14 days after starting giving fringe benefits to employees.

How to calculate FBT

(a) For housing accommodation, the taxable value is:
 (i) For property owned by the employer:
*    50 % of the taxable value with the greater amount either of:
*    The open market value of the use (rental value) of such property;  
or
*    10 % of the employee’s salary where unfurnished housing accommodation is provided; or
*    12 % of the employee’s salary where furnished housing accommodation is provided.
(ii)    For property rented by the employer, the greater of :
*     The rental paid by the employer; or
*    10 % of the employee’s salary where unfurnished housing accommodation is provided for;
or
*     12 % of the employee’s salary where furnished housing accommodation is provided.

(b)     For motor vehicles, the taxable value shall be 15% of the original cost of each vehicle per annum

(c)     For school fees and related expenses paid by the employer directly to institutions, the taxable value shall be 50% of the cost to the employer. But if the fees are paid directly to the employee, the whole amount becomes the taxable value.

(d)     The taxable value shall be the entire cost to the employer. For other fringe benefits including but not limited to:
(i)     Utilities such as electricity, water and telephone (including mobile phones and airtime).
(ii)      Household items of any kind
(iii)     Vacations, travel and any other provisions
(iv)     Domestic services of any kind, such as gardeners, maids, guards and watchmen
In case of dwelling property being owned by the employer, the cost of a gardener, security guard and watchman shall not constitute taxable benefit.

When and where should FBT be paid?

Fringe Benefit Tax is paid quarterly and is due within 14 days from the end of each quarter. FBT should be remitted to any MRA Domestic Tax office nearer to the taxpayer.

What are the penalties for failure to remit or register for FBT?

Any employer who fails to register or delays or fails to pay Fringe Benefit Tax shall, in addition to the amount due, be liable to a penalty of 20 % of the tax due.

NOTICE
The Law relating to Fringe Benefit Tax is Taxation Act. The information in this brochure is not intended to be a legal interpretation of the Act (regulations made there under) nor does it override any provision thereof.






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