Lolest! wrote:Silk wrote:It's the most cheap way of acquiring a car especially the first one. Imagine holding an office position that warrants a car allowance and you do not have the said car!!
i saw an advert by KRA in todays Nation on fringe benefit tax. Employers to be taxed on loans less than 4pb
Employers have always been taxed on FBT. If the employer offers a loan at a rate less than the KRA prescribed rate (4%), the difference is considered a benefit, and taxed on the employer.
Lets be simplistic. Your employer offers you a loan of ksh 1,000,000 at 1%. The interest you will pay is ksh 10,000. The KRA prescribed rate is 4%, therefore you should pay an interest of ksh 40,000. The difference ksh 30,000 (40,000 - 10,000) is considered a benefit and hence the employer pays 30% of it = ksh 9,000 to KRA.
FBT replaced Low Interest Benefit. With Low Interest benefit, the tax computation is the same as FBT, but it is instead assessed on the
EMPLOYEE, not
EMPLOYER. It is still in force as some loans that were issued before FBT was introduced are still in force and the tax regime can't change for these loans.
However, you will note that most employers are currently giving loans at a higher rate than 4%, so the employers currently paying this are very few, unless you have a sufficiently philanga...thropic employer.