We are a construction company X. My question is about 3 different employees A: Moved to JHB from CPT and the company is paying for his rent accommodation in JHB. B : Moved to JHB from Korea and the company is paying for rent accommodation in JHB.
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The granting of an allowance in respect of accommodation and meals is a matter that is to be negotiated between the employee and the employer. But we don’t believe that, in addition to the employer bearing the “expense of hiring residential accommodation in an hotel or elsewhere for the employee” the employer should also pay or grant “any amount … during that year … as an allowance or advance, … on any accommodation, meals and other incidental costs”. The proviso to section 8(1)(c) states that “this subparagraph does not apply to the extent that the employer has borne the expenses (otherwise than by way of granting the allowance or advance) in respect of which the allowance was paid or granted for that day or part of that day”.
The law relevant to the hiring residential accommodation in an hotel or elsewhere is found in section 10(1)(nB)(ii) of the Income Tax Act. It exempts from normal tax “… any benefit or advantage accruing to any employee (as defined in paragraph 1 of the Seventh Schedule) by reason of the fact that his employer (as defined in the said paragraph), has, in consequence of the transfer of the employee from one place of employment to another place of employment or the appointment of the employee as an employee of the employer or the termination of the employee’s employment, borne the expense—
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…;
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…; or
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of hiring residential accommodation in an hotel or elsewhere for the employee or members of his household during the period ending 183 days after his transfer took effect or after he took up his appointment, as the case may be, if such residential accommodation was occupied temporarily pending the obtaining of permanent residential accommodation;
Paragraph 9(7A) of the Seventh Schedule is relevant to the foreign resident, we assume they are. It reads as follows:
Subject to subparagraph (7B) no rental value shall be placed under this paragraph on any accommodation provided by an employer to an employee away from such employee's usual place of residence outside the Republic --
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for a period not exceeding 2 years from the date of arrival of that employee in the Republic, for the purposes of performing the duties of his or her employment; or
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if that accommodation is provided to that employee during the year of assessment and that employee is physically present in the Republic for a period of less than 90 days in that year.
The current practice generally prevailing explains the benefit of the use of a vehicle by more than one employee as follows:
The grant of a right to use a motor vehicle is the fringe benefit that is subject to taxation. An employer who allows more than one employee to use the same motor vehicle for private or domestic purposes is granting each of the employees a right to use the vehicle. Each employee must therefore be taxed on the full value of the benefit …
We agree with this view.