BONUSES PAID TO DIRECTORS OF PRIVATE COMPANIES

BONUSES PAID TO DIRECTORS OF PRIVATE COMPANIES

Accountancy SA

Members are reminded that the tax treatment of variable remuneration changed with effect 1 March 2013. The position is that both the accrual to the employee and the deduction of the expenditure incurred by the employer will take place on the date during the year of assessment on which the amount is paid to the employee by the employer. So, whilst from an accounting point of view it is necessary to account for a bonus that a director of a private company is entitled to in the financial year that it relates to, the bonus may only be deducted in that same year if it was actually paid to the individual concerned. If it is paid after the last day of the year of assessment (for instance 28 February 2014) it cannot reduce the taxable income of the year to which it relates.