Abstract
The main objective of this paper was to seek certainty regarding the interaction between the value-added tax (VAT) implications of fringe benefits and its impact on the taxable values of such taxable fringe benefits for income tax purposes. Hence, the paper investigated whether VAT should be included or excluded when the taxable value of fringe benefits for income tax purposes is determined. In 2019, a minor amendment was made to the opening words of section 23C(1) of the Income Tax Act (58 of 1962), a section which interacts in linking the VAT consequences of a fringe benefit with that of determining its taxable value for income tax purposes. However, the actual words applied in the Amendment Act do not align with National Treasury's intention as described in their Explanatory Memorandum. This misalignment is the problem that the study aimed to address, highlighting the two possible approaches of interpretation – literal versus purposive. The methodology adopted was nested in the paradigm of interpretivism, whereby a qualitative research approach was employed by means of doctrinal research-supplemented by a basic comparative analysis of two different approaches of interpretation. The outcome of the study highlighted an anomaly in the income tax consequences triggered by the application of section 23C(1), causing an unintended change in policy which negatively impacts the taxable value of other taxable fringe benefits. The paper makes recommendations to be considered by the legislator to rectify the identified anomaly which could aid in providing certainty regarding the interaction between fringe benefit values and VAT.