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The taxability of rewards from suppliers

Successful business in today’s competitive climate thrives on building relationships with one’s suppliers, clientele and employees. Businesses, as a form of strategic engagement, extend their appreciation and recognition to these key role players with rewards (or incentives) such as prizes, holidays and free goods and/or services. This treatise examines the taxation implications of such rewards and determines that the market value thereof should be taxed in the hands of their recipients. This study also investigates possible indicators (or points of reference) to establish such market value and suggests alternate values that may be ascribed thereto for inclusion in the recipient’s gross income. Where the rewards are passed onwards by the recipient to its employees, fringe benefit consequences are occasioned and this study observes that the market value thereof should be taxed in the employees’ hands. The study goes on further to consider the position of the supplier (or provider) of the rewards and finds that the supplier is entitled to a deduction of the cost of the rewards it has provided to its clients or customers. This study also reflects upon the penal implications of not including the market value of rewards in gross income and notes that such non-inclusion constitutes a fiscal loss and is subject to an understatement penalty. Key recommendations on how such omission may be addressed by the tax authorities are also presented.
Date January 2016
CreatorsAkoonjie, Ahmed Hassen
PublisherNelson Mandela Metropolitan University, Faculty of Business and Economic Sciences
Source SetsSouth African National ETD Portal
Detected LanguageEnglish
TypeThesis, Masters, MCom
Formatvi, 63 leaves, pdf
RightsNelson Mandela Metropolitan University

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