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XERO and SAGE Accounting Advisers
October 11, 2019
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Employee Benefits

My recent time spent with SRA audits for clients has revealed that are lot of businesses are making various payments to their employees, and not including it in their monthly payroll. The result is that SRA is levying the highest tax rate on this @ 33% plus penalties @25% and interest on top of this. The sad part is that if your records are not in order you will end up paying the maximum rate.

Some examples are;

  • Rentals being paid for employees off site while performing their job. 10% withholding tax needs to be deducted and paid over to SRA, the remaining 90% needs to be paid to the owner for the rental due. The owner has the benefit of the tax credit, when filing their income tax return.
  • Rations been supplied to employees and not included in their gross income. This is a fringe benefit and is taxable. Although the employers intent is good by providing rations you cannot claim the vat on this even though you have paid Vat on it. You need to include the rations in your monthly payroll as part of the employees gross income.
  • Any amount that has been paid to employee e.g. airtime, loans, advance etc needs to be added to the gross income on their payroll for the period in question.

The income tax act is clear – Income received in cash or otherwise including gifts is to be included in the gross income.

If you are unsure, send us an email or make contact with us to discuss your particular scenario.

Regards

Erik