Summary of the Principles of Company Cars
1. The vehicle is owned or rented by the employer (or an associated institution).
2. When the use of the vehicle is granted to an employee, it is called a ‘company car’.
3. Company cars can be granted to employees even if the employee does not travel for business purposes.
4. The employer must:
a. Establish the determined value of the vehicle
b. Determine the correctly monthly fringe benefit percentage
c. Calculate the income value of the fringe benefit that arises for the private travel use
d. Include a percentage (100% or 80% or 20%) of the income fringe benefit value in remuneration
e. Report the income value of the fringe benefit on tax certificates.
5. The employee should:
a. Record his daily business kilometers in a logbook
b. Record his expenses if he pays the full amount towards licence, insurance, or maintenance costs
c. Record his expenses if he pays the full amount towards fuel costs
d. Claim business travel expenses on assessment by submitting his logbook details in his ITR12
e. Claim running cost expenses on assessment by submitting his logbook details in his ITR12.
Summary of the Tax calculation Principles for ‘purchased’ Company cars
1. The employer pays for all capital and running costs of the vehicle
2. The vehicle is deemed to be used for private travel only and remuneration is determined on that basis
3. Business travel expense reduction is provided for in the payroll by including only 80% or 20% of the income value in remuneration.
The fringe benefit and tax for the use of a company car is calculated and administered by –
1. Calculating the fringe benefit income value by multiplying the vehicle’s determined value by a monthly percentage
2. Including a portion of the fringe benefit’s income value into remuneration
3. Reporting the income value of the fringe benefit on the tax certificate for assessment purposes
4. Subject to a logbook and proof of running costs paid by the employee, the fringe benefit value can be reduced on assessment before the calculation of income tax.