Income from Employment

mojoki · 2014-05-12T13:17:08+00:00

Income from Employment Employment means a position of an individual in the employment of another person; a position of an individual as manager of an entity other than as partner of a partnership; a position of an individual entitling the individual to a periodic remuneration in respect of services performed; or a public office held by an individual, and includes a past, present and prospective employment. The general rule is that income from employment is 'gains or profits from employment'. This means that included in income from employment is salary, allowances, gratuity, benefits in kind and all other forms of remuneration or compensation for the employment. The items to be included in the computation of income from employment are provide by S. 7 (2) of the Income Tax Act, 2004. These items are: Payments of wages, salary, payment in lieu of leave, fees, commissions, bonuses, gratuity or any subsistence travelling entertainment or other allowance received in respect of employment or service rendered; Payments providing any discharge or reimbursement of expenditure incurred by the individual or an associate of the individual; Payments for the individual's agreement to any conditions of the employment; Retirement contributions and retirement payments; Payment for redundancy or loss or termination of employment; Other payment made in respect of employment including benefits in kind. However, the following are excluded from income from employment: Any allowance that is solely reimbursement to the employee of expenditure spent wholly and exclusively in the production of the income of the employer is excluded from employment income. For example, if the employee receives a travel and accommodation allowance and that allowance is spent entirely on travel and accommodation for the employee while he/she is away solely for the employer's business purposes, then this is excluded. Medical expenses of the employee, the employee's spouse and up to four children is excluded, so long as any allowance is actually used either for medical expenses or medical insurance and is available on a non-discriminatory basis to all employees of the employer. Benefit from the employer providing a motor vehicle or use of motor vehicle to the employee for his/her personal use is generally included as a benefit in kind. However, if the employer does not claim a deduction for the costs of providing the vehicle, it is excluded from the income of the employee. As Government does not pay income tax and therefore does not claim deductions, this means that Government employees will not pay tax on this benefit. If an employer provides free housing to an employee, this is usually included as a benefit in kind. However, it is excluded as a benefit for Government employees. If an employer provides for travel costs for the employee, his/her spouse and up to four children between the place of work and the place of domicile which is more than 20 miles away, this is not included in income from employment. For example, employer-provided passage costs to take up employment or to go on annual leave for the employee and his/her family are not included On premises cafeteria services available on a non-discriminatory basis to all employees of an employer are not included as a benefit in kind. Small benefits that are administratively impracticable for the employer to account for according to which employee benefits are also excluded. Retirement contributions paid by the employer on behalf of the employee are included in income from employment (as are the employee contributions as they are part of the salary). However, under section 61, total income is then reduced by all retirement contributions, up to a limit. This means the treatment for employees and self employed is similar, and that all retirement contributions (employer, employee and self employed) are not taxed. In this world nothing is certain than Tax and Death.

Thread starter mojoki
Start date May 12, 2014

mojoki

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Income from Employment

mojoki

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