3. Legal Framework for Travel Reimbursements
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”
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.
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.”