Taxable Benefits – Salary & Wage Earners

A taxable benefit is provided free by the employer to the employee or persons associated with the employee (e.g. housing, telephone, water etc).

The value of 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.

The value of the benefits provided should be clearly shown on the Pay As You Earn Employee 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 employer?

This means that the employer must make an estimate of the value of the benefit (i.e. what it costs the employer to provide that benefit), add it to the employee's salary for the year and then apply the applicable resident and non-resident tax rates.

What is the employer's responsibility?

It is the employer's responsibility to show the gross salary amount inclusive of benefits on each employee's Pay As You Earn Employee Certificate.

What are some of the common benefits?

Some of the most common benefits provided by employers are:

• housing.
• private use of motor vehicle.
• discounted interest rates on loans.
• discounted interest rates on housing loans.
• medical expenses.
• additional FNPF apart from the normal 8% that employers are required by law to contribute.
• health or medical insurance.

What happens if this information is not declared?

If the value of the taxable benefits is not shown on the employee's Pay As You Earn 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.

Where can I get the info on Value of Benefits of Employees?

Click here to download that information.

Practice Statement No. 30 which provides the revised guidelines on the valuation of benefits provided under the PAY-AS-YOU-EARN . This Statement revokes and supercedes previous PAYE Circulars on valuation of benefits issued by FIRCA or the previous Department of Inland Revenue.