How are the Long Service Award components taxed?
The first R5 000 of a qualifying long service award is exempt from tax. Any value exceeding R5 000 is included in remuneration and subject to PAYE, UIF and SDL.
The R5 000 limit is a combined limit for all types of awards, which can only include:
- cash,
- use of an asset fringe benefit,
- acquisition of an asset fringe benefit, and
- free or cheap services fringe benefit.
If the Long Service Award is a:
- Cash award - full value (taxable and exempt) is reported against IRP5 code 3622.
- Fringe benefit as mentioned above - full value (taxable and exempt) reported against IRP5 code 3835.
A Long Service Award can be processed on employee level by first creating the following components on company level.
Important
These components should only be used if the employee has an initial unbroken period of service of at least 15 years and any subsequent unbroken period of at least 10 years.
Navigate > Config > Payroll > Payroll Config > Payroll Components
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