“Fringe benefit” means any benefit provided or deemed to be provided by reason of an employment
or office. The basis for the taxation of fringe benefits is article 4(1)(b) of the Income Tax Act, which
applies to all gains or profits derived from an employment or office, regardless of whether they are
received in cash or in kind and whether they are received in terms of the normal conditions of the
contract of service or by way of a special or ex gratia allowance. The income from an employment or
office reported in tax returns must therefore include the value of fringe benefits, and employers
must account for fringe benefits provided to their employees under the FSS system. Beneficiaries
who fail to declare the fringe benefit will be liable to additional tax for omission as contemplated by
the Income Tax Acts. Employers who fail to report the fringe benefits properly and in time will be
subject to penalties.
When a payment or other benefit represents a reward for services rendered by a person, it is taxable
not only when it is provided directly from the employer to the employee but also when it is provided
indirectly, that is either by third parties or to third parties.
Although fringe benefits have the nature of normal income they have certain characteristics which
warrant special regulation. The Fringe Benefits Rules (SL 123.55) were prescribed in order to:
• ensure that no doubts are raised as to the taxation of fringe benefits,
• establish in which circumstances and to what extent are fringe benefits subject to tax, and
• determine their value.
To read more about Fringe Benefits, click on the following link to access the Fringe Benefits Tax Guide. The guide explains the provisions contained in the Fringe Benefits Rules (“the Rules”). It
also explains how employers are to account for fringe benefits for the purposes of the Final
Settlement System (FSS) Rules (SL 372.14).