Understanding Fringe Benefit Tax
Last Updated: 12 December, 2019 - Print
Fringe Benefit Tax (FBT) is tax paid on the taxable values of fringe benefits being provided by an employer to an employee. The rate for FBT is 30 percent and all employers except the government are liable to FBT.
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, the taxable value for property owned by the employer is 50 percent or 10 percent of the employee’s salary where unfurnished housing accommodation is provided or 12 percent of the salary where furnished housing accommodation is provided.
For motor vehicles, the taxable value shall be 15 percent of the original cost of each vehicle per annum. For school fees and related expenses paid by the employer directly to institutions, the taxable value shall be 50 percent of the cost to the employer but the whole amount becomes the taxable value if the fees are paid directly to the employee.
To register, an employer fills Form FBT 1 and gets Form FBT 2 for remittance. Any employer who gives fringe benefits to the employees should register for FBT 14 days after starting giving fringe benefits to employees.
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, for instance 15 percent instead of 38 percent, the difference, in this case 23 percent, is treated as benefit and therefore subject to FBT.
However, education loan or an emergency advance obtained to cover medical or funeral expenses do not constitute a personal loan and therefore not liable to FBT. FBT 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.
Any employer who fails to register or delays or fails to pay FBT shall, in addition to the amount due, be liable to a penalty of 20 percent of the tax due.