Chapter 5. Travel Reimbursements
5.1 Introduction to Travel Reimbursements
The business travel compensation principles discussed in the introductory sections of Chapter 2 underpin the understanding and the compliant administration of business travel compensation, and it is important that they are always kept in mind.
This Chapter discusses ‘travel reimbursements’, one of the three business travel compensation options that an employer can choose from when compensating an employee who incurs the employer’s business travel expenses when traveling for business purposes.
Of the three business travel compensation options, there are a number of reasons why employers choose travel reimbursements for their travel policy, but probably the main reason is because the concept is straight forward and easily understood, particularly by the employee who does the travel.
More on this at the end of this Chapter and in the closing Chapter 6.
5.2 Travel Reimbursement Principles
The correct term for this special type of reimbursement is a “reimbursive travel allowance”, but to keep it short and sweet, the term “travel reimbursement” is used in this workbook.
The name “reimbursive travel allowance” underlines the dual nature of this method of business travel compensation – it has an aspect of an allowance, but it is more closely aligned to a reimbursement – so I feel comfortable to refer to it as a ‘travel reimbursement’.
It has the nature of a reimbursement because it is paid after being claimed by the employee as and when he travels for business purposes and incurs the employer’s business travel expense.
It is not paid regularly is generally the case with allowances.
However, it is not a ‘true’ reimbursement because the exact value of the expense is not reimbursed.
The value to be reimbursed is estimated (or ‘deemed’) according to the requirements of section 8(1)(b)(iii) of the Income Tax Act (see the Legal Framework in the next section). Because it does not have an exact value, it moves the reimbursement somewhat towards being classified as an allowance, which you will remember is an amount that is “… based on the expected business-related expenditure.”
Reimbursements resulting from expenses incurred by an employee on behalf of an employer are always business related, and the same applies to travel reimbursements.
The employee claims the business kilometers that he travelled, the reimbursement is generally not taxable or if a portion of it is taxable then business travel expenses can be deducted on assessment if a logbook is submitted to SARS.
It is important to understand the difference between a reimbursement of an employee’s business travel expenses (the subject of this Chapter), and a reimbursement of an employee’s private travel expenses.
A reimbursement of private travel expenses is not provided for in the legislation.
However, some employers choose to financially assist an employee with private travel expenses, but this assistance would be fully taxable with no deduction possible, reported as either additional salary (code 3601) or preferably a taxable general allowance (code 3713).
Refer to the introductory section of Chapter 2 that explains this scenario in more detail.
The important concept of ‘private travel’ is also discussed in a section of Chapter 2.
5.3 Legal Framework for Travel Reimbursements
The legal foundation of the travel reimbursement requirements are set out below for your information (or to be skipped over  ). They are referred to when we get to the tax calculation and tax certificate reporting rules.
The travel reimbursement requirements are provided for in sections 8(1)(b)(iii) and (iiiA), as well as in the Fourth Schedule definition of remuneration subparagraph (cC) that was introduced with effect from 1 March 2018.
Outside of the legislation, the following documents are important:
• The ‘Fixing of Rate per Kilometer in Respect of Motor Vehicles’ Regulation [Gazette # 48162]
• The SARS BRS (Business Requirements Specification that provides the tax certificate reporting rules)
• The SARS IN14 (Interpretation Note number 14).
Section 8(1)(b)(iii) – ‘Deemed’ Rate per Kilometer

“where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business (excluding the said private travelling), or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient, the amount expended by the recipient on such business travelling shall, unless the contrary appears, be deemed to be an amount determined on such actual distance at the rate per kilometre fixed by the Minister of Finance by notice in the Gazette for the category of vehicle used:
Provided that where an allowance or advance is deemed to have accrued under section 7B to the recipient in the year of assessment during which that allowance or advance is paid, the distance travelled for business purposes in respect of which that allowance or advance is received shall be deemed to have been travelled during the year in which that allowance or advance is paid”

[my emphasis added]
Section 8(1)(b)(iiiA) – ‘Actual’ Rate per Kilometer
The provisions of this subsection allow an employee to calculate a rate per kilometer that is based on the employee’s records of the actual costs of ownership of the vehicle including purchase costs, financing costs, and wear-and-tear. My understanding is that this option is seldom used. Because the wording is long and complex, for the sake of keeping this workbook as simple as possible, the wording of section 8(1)(b)(iiiA) has not been included.
Fourth Schedule Definition of Remuneration

“remuneration” means … including –
(cC) 100 per cent of so much of the amount paid or granted as an allowance or advance referred to in section 8 (1) (b) (iii) as exceeds the amount determined by applying the rate per kilometre for the simplified method in the notice [described as the ‘Prescribed‘ rate in the SARS BRS] fixing the rate per kilometre under section 8 (1) (b) (ii) and (iii) to the actual distance travelled;

[subparagraph (cC) inserted into the definition with effect from 1 March 2018]
Before continuing with the discussion of the practical aspects of travel reimbursement administration, it is worth repeating a statement made in the SARS Interpretation Note # 14:

“Any allowance, advance or reimbursement is a reflection of business-related expenditure or anticipated business-related expenditure of the employer.”

5.4 SARS Interpretation of a Reimbursement
As discussed in Chapter 2, SARS interprets the concept of a reimbursement as follows:

“A reimbursement of business-related expenditure occurs when an employee has incurred and paid for business-related expenses on behalf of an employer without having had the benefit of an allowance or an advance, and is subsequently reimbursed for the exact expenditure by the employer after having proved and accounted for the expenditure to the employer.”

This interpretation of reimbursements in general applies equally to the special category of travel reimbursements.
Travel Reimbursement vs Travel Allowance
The underlying principles for a travel reimbursement are similar to those for a travel allowance, but the method of calculation of the compensation, the taxation thereof, and the tax certificate reporting rules, differ radically.
The purpose of a travel reimbursement is to compensate an employee for travelling for business purposes in any motor vehicle that is privately owned – it is not to assist the employee to purchase a motor vehicle, nor is it to reimburse an employee for private travel expenses.
Reimbursements of Business travel expenses using Public Transport
A travel reimbursement is calculated by multiplying the number of kilometers travelled by a rate per kilometer, and there are rules that specify how it must be taxed and reported on a tax certificate.
The public transport vehicle can be a motor vehicle, a bus, a taxi, or a train, and the travel could be for either private or business purposes.
If the employer assists the employee financially for travel in public transport, then if the travel purpose is:
1. Business:
Proof of the travel expense would allow the employer to pay a general reimbursement
2. Private:
This financial assistance would be taxable with no deduction possible, reported as either additional salary (code 3601) or preferably as a taxable general allowance (code 3713).
Refer to the introductory section of Chapter 2 that explains this scenario in more detail.
Employees that qualify for a travel Reimbursement
Travel reimbursements may only be paid by an employer to an employee who uses a privately-owned motor vehicle for the business travel (and who has a valid driver’s licence).
The car does not have to be owned by the employee – it can belong to a friend or a family member.
The Employer’s Travel Reimbursement policy
One of the advantages to the employer of using travel reimbursements is that the employer has control over the rate/km used to calculate the reimbursement. The employer can decide to use any rate/km that he likes, or for that matter, a range of rates for different categories of employees.
In this way, the employer has control over the cost of business travel in his organisation.
Having decided on the rates per km that he is prepared to pay, the employer then has a duty to administer the travel reimbursements correctly in terms of the law.
These procedures will be discussed in the sections below.
5.5 Tax Calculation Principles
In general, amounts that are paid to an employee in the form of what I call a legally compliant reimbursement, are neither remuneration nor income, are not processed in the payroll, and are not reported on a tax certificate. They are the employer’s expense and are accounted for in the company’s financial reporting.
The following are the requirements for a legally compliant reimbursement.
The reimbursement must “further the trade of the employer”, and there must be:
1. Instruction from the employer to incur the expense
2. Proof of the value of the expense (vouchers, invoices, etc.) must be provided to the employer
3. If an asset was purchased and reimbursed, then the asset must be owned by the employer.
Points 1 and 2 apply to travel reimbursements.
Reimbursements do not have to be reported on tax certificates except for:
1. Travel reimbursements (the reporting rules will be discussed below)
2. Subsistence allowances (which SARS deem to be a reimbursement if paid below the daily expense limits).
Travel Reimbursement Calculation – Rules from 1 March 2018
As can be seen in the ‘Legal Framework for Travel Reimbursements’ section above, the Fourth Schedule definition of remuneration was amended by the addition of sub paragraph (cC) that provides the tax calculation rules for travel reimbursements from 1 March 2018.
Sub paragraph (cC) specifies that the remuneration portion of a travel reimbursement must be calculated as 100% of the portion of the travel reimbursement amount that exceeds an amount calculated by multiplying the business kilometers travelled by the ‘Prescribed’ rate/km (section 4 of the ‘Fixing of Rate’ regulation).
This remuneration portion of the travel reimbursement amount is subject to PAYE etc. in the payroll, as well as income tax on assessment, and must be reported under code 3722 (a ‘PAYE’ code).
The remaining portion of the travel reimbursement amount is not remuneration (therefore no PAYE) but it is income subject to income tax on assessment, and must be reported under code 3702 (an ‘IT’ code).
The introduction of sub paragraph (cC) to the Fourth Schedule resulted in changes to the tax certificate reporting rules for codes 3702 and 3703, and the introduction of a new code 3722 for the taxable portion of the travel reimbursement.
Travel Reimbursement – Tax Certificate codes from 1 March 2018
Code 3702 must be used to report a travel reimbursement if –
1. A code 3701 travel allowance is paid in addition to the travel reimbursement, or
2. The rate/km used to calculate the travel reimbursement exceeds the Prescribed rate/km
Note:
• Code 3702 value = Business km x the portion of the rate/km that exceeds the Prescribed rate/km
• Code 3702 is not remuneration (no PAYE), but it is income (income tax will be calculated).
Code 3703 must be used to report a travel reimbursement if –
1. Codes 3701, 3702, and 3722 are not reported (their value is R0,00), and
2. The rate/km used to calculate the travel reimbursement does not exceed the Prescribed rate/km.
Note:
• Code 3703 value = Business km x a rate/km that does not exceed the Prescribed rate/km
• Code 3703 is not remuneration and is not income, therefore no PAYE and no Income tax.
Code 3722 must be used to report a portion of a travel reimbursement if –
1. The rate/km used to calculate the travel reimbursement exceeds the Prescribed rate/km
Note:
• Code 3722 value = Business km x (the rate/km used to reimburse less the Prescribed rate/km)
• Code 3722 is remuneration and income, therefore PAYE and income tax will be calculated.
Code 4582 – The remuneration portion of the following allowances and benefits
For the purposes of section 11F (that limits the deduction in respect of contributions to retirement funds to 27,5% of remuneration), SARS requires the remuneration value of certain codes where the remuneration value differs from the income value stated on the tax certificate, to be accumulated and reported against code 4582.
Effective from 1 March 2018, code 4582 must reflect the total of the remuneration value of:
1. Code 3701 (80% or 20% of the travel allowance)
2. Code 3802 (80% or 20% of the company car fringe benefit if the vehicle is purchased)
3. Code 3816 (80% or 20% of the company car fringe benefit if the vehicle is rented).
Travel Reimbursement Calculation Scenarios
The application of the legislation amendment, the changes to the Fixed Rate regulation, and the related changes to the PAYE BRS tax certificate reporting rules are illustrated in the following table.

2024 SCENARIOS TOTAL REIM-BURSED TRAVEL ALLOWANCE REMUNERATION? INCOME?
BASE VALUES NO YES YES
TOTAL KM R/KM 3701 3703 3722 3702
20 000 3.64 72 800 0 72 200 0 0
20 000 4.64 92 800 0 92 800 0 0
20 000 5.64 112 800 0 0 20 000 92 800
20 000 3.64 72 800 10 000 0 0 72 800
20 000 4.64 92 800 10 000 0 0 92 800
20 000 5.64 112 800 10 000 0 20 000 92 800
Determined Value for Travel Reimbursements
The determined value of a motor vehicle that must be used as the starting point of the calculation of the determined rate per kilometre is defined in a regulation to the Income Tax Act that is included in the legislation in the appendix to this manual for your convenience.
The determined value for travel reimbursements is calculated in exactly the same way as for the travel allowance, and to save duplication in this workbook, can be referred to in the travel allowance chapter.
Prescribed Rate/km for Travel Reimbursements
Again, the calculation of the Prescribed rate/km for the motor vehicle used for the business travel reimbursement is exactly the same as the calculation for travel allowances, and to save duplication can be referred to in the travel allowance chapter.
5.6 Summary of the Main Aspects of Travel Reimbursements
The following are the main aspects of a travel reimbursement.
1. Employees who qualify for a travel reimbursement in terms of section 8(1)(b)(iii) are those who –
a. Travel for business purposes (with a valid driver’s licence …  ),
b. In a motor vehicle that is privately-owned.

2. The employer –
a. Must set the rate/km for travel reimbursements in its travel policy
b. May only pay a travel reimbursement to ‘qualifying’ employees
c. Must process the travel reimbursement through the payroll
d. Must allocate the correct tax certificate codes depending on the rate/km used
e. Must report the travel reimbursement correctly on the tax certificate.

3. The employee –
a. Must claim his business travel in accordance with the employer’s policy and procedures
b. Should maintain a business travel logbook to be in a position to claim business travel expenses
c. Should claim business travel expenses if there is taxable income by submitting his logbook details.
Note that a reimbursement for travel expenses is only a travel reimbursement if its value is calculated by:
• Multiplying the number of business kilometers travelled
• By a rate per kilometre.
Any other type of compensation paid by the employer in relation to the vehicle or the travel is either a travel allowance, or a normal reimbursement of an employer’s business expense incurred by the employee, or an additional payment to assist an employee with private travel costs (fully taxable with no deduction allowed).
See the section in the Travel Allowance Chapter 4 for more details in this regard.
5.7 Income Tax calculation on Assessment
The SARS income tax calculation on travel income is summarised in Chapter 6.
Every employee who is paid a travel reimbursement, should keep a logbook of his business travel if the rate/km paid by the employer exceeds the Prescribed rate/km, resulting in a code 3702 on his tax certificate.
In fact, all employees that travel for business purposes should maintain a logbook irrespective of which of the three methods of business travel compensation the employer uses.
Employers should consider setting up standard spreadsheets for the employee’s weekly / monthly business travel claim form that contains at least the following fields that are required for the logbook:
• Date
• Number of business kilometers (total for the day)
• Reason for travel (name of the client / area / reason etc.).
This spreadsheet then doubles as the employee’s logbook at the end of the tax year, as well as being used by the employer to administer the travel reimbursement and management information.