Salary & Wage Earners
(Effective from 1 January, 2012)
A cash benefit is a taxable benefit provided by the employer to the employee or persons associated with the employee.
The value of the cash benefits received by an employee from his/her employer is subject to income tax. Employers are required to deduct tax from emoluments specified under Section 79 of the Income Tax Act revised 13th March 2014; Act No.5 of 2014 An Act to Amend the Income Tax Act (Cap.201).
However, if the employer provides non-cash fringe benefits to the employee, the employer is required to pay fringe benefits tax and it shall not be recovered from the employee.
The value of the cash benefits provided should be clearly shown on the IRS452A Tax Withholding certificate given to the employee at the end of the year. The value of the benefit should be included with the Gross salary and PAYE is to be calculated from the total amount.
What should this mean to an employee?
The employee is liable to pay income tax on all cash benefits provided by the employer.
The employer shall pay fringe benefits tax for all non-cash fringe benefits provided to the employee.
A tax deduction will be allowed to Employer on the amount of FBT paid.
Some of the most common cash benefits provided by the employers are:
|2||Motor vehicle allowance|
|3||Reimbursement of tuition fees|
|4||Reimbursement of medical expenses|
|5||Excess FNPF contribution by the employer|
What happens if this information is not declared?
If the value of the cash benefits is not shown on the employee’s Employee Certificate, then the employee should declare that information when lodging their Income Tax return.
The employee may be penalised for failing to provide a true and complete return of income and the employer may be charged with failing to comply with the PAYE regulations.