Covered in paragraph 2(d), 9 and 10A of the Seventh Schedule
Employer-provided accommodation – some background:
Employees are often required to provide their services to the employer in different locations to their usual place of residence, sometimes on a short-term basis (i.e. a few days/weeks) and sometimes on a longer-term basis (i.e. months/years). Depending on the circumstances, there will more likely than not, be some tax implication for the employee.
In some cases, the employee, for various reasons, needs to retain their main place of residence and as such cannot fully relocate to another area.
Some employers will bring a foreign individual (i.e. an expat who retains their usual place of residence outside of South Africa) to SA on a contract / assignment and provide that employee with accommodation for the period of their stay.
Employers also sometimes provide their employees with access to an employer-owned / rented property for them to use for holiday purposes, as an incentive.
Four common types of accommodation scenarios:
1. Where the Employer provides a local employee with accommodation for a period of time:
- Short stay
- Long stay
2. Where the Employer provides an expat with accommodation for a period of time:
- Short stay
- Long stay
3. Where the Employer provides the employee with the use of holiday accommodation where the employer either:
- rents the property, or
- owns the property
4. Where the Employer “gives” the employee accommodation, such as a low cost house / flat or land – i.e. where a transfer of ownership takes place.
Where the Employer provides a local employee with accommodation for a period of time:
Short term: There is no tax implication where an employee is provided with temporary accommodation whilst away from their place of residence for a short period of time. As a rule of thumb, a “short period of time” is usually considered by SARS to be less than 6 months. However, the actual circumstances / facts causing this temporary accommodation needing to be supplied, needs to be considered as SARS could deem the period too short (or even too long!). Remember that in an audit SARS always has the last say!!
Long Term: In this case the employee has had to relocate from his / her place of residence, and the employer has provided accommodation to that employee for a period of time. The definition of “time” in this case is also open to debate and SARS will establish what, to them, is deemed to be a fair period of time (i.e. “time” that is outside the allowable time period in cases where the employee is relocated at the request of the employer. At some point this accommodation becomes a taxable benefit, and to calculate the value for tax purposes SARS has provided a formula for this purpose.