Fringe Benefits Tax
Every employer, other than the government, who provides fringe benefits to any of his employees, including directors, shall be liable to pay Fringe Benefits Tax (FBT) on the total taxable value of such fringe benefits at a rate of 30 percent.
The Taxation Act defines a fringe benefit as any asset, service or other benefit in kind provided by, or on behalf of, an employer to an employee, if such benefit includes an element of personal benefit to the employee.
Payment of school fees by a company for an employee’s children, or provision of accommodation to an employee or provision of concessionary loans to an employee are examples of fringe benefits.
FBT is tax charged on the total taxable value of such fringe benefits as enjoyed by an employee but paid for by an employer. FBT does not apply on benefits paid to an employee by the employer in cash.
Benefits paid in cash form part of the employee’s emoluments, therefore, taxed on the employee under Pay As You Earn (PAYE). Medical facilities and advance payments for housing, funeral, medical and tuition fees are not fringe benefits.
Payment of FBT should not apply to fringe benefits provided to an employee whose annual taxable income does not exceed K420,000 or K35,000 per month. FBT liability should not be imposed on an employee.
An employer who provides fringe benefits to an employee whose annual taxable income is in excess of K420,000 or K35,000 per month is required to register within 14 days they begin to provide the fringe benefits to the employees.
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