2. ‘Best Practice’ For Travel Reimbursements from March 2018
The amended legislation effective from 1 March 2018 states that the portion of the travel reimbursement that is calculated at a rate/km greater than the Prescribed rate/km must be reported under code 3722 (While the portion at and below the prescribed rate must be reported under code 3702).
This encourages employers to use a rate/km that is not greater than the Prescribed rate/km (R4,64 for the 2024 tax year) for all employees, but be aware of what might happen on assessment if the Prescribed rate/km is greater than the Cost Scale rate/km for the vehicle used.

Assuming that a travel allowance is not paid in addition to the travel reimbursement (if a travel allowance is paid, the employee cannot elect to request the employer to use the Prescribed rate/km), the following principles are provided to assist you:
For travel reimbursement administration in the payroll, if the rate/km used by the employer Is not greater than the Prescribed rate/km, or even better, is linked to equal the Prescribed rate/km, then:
1. There will be no code 3722 remuneration, therefore no PAYE, SDL, UIF, ETI, etc. will be calculated.
2. Only code 3703 will be reported on the tax certificate reflecting the reimbursed amount calculated up to the Prescribed ratekm which is neither remuneration nor income.
3. The code 3703 amount will not be used in the income tax calculation.
4. A logbook is not required by SARS.
5. The employer benefits by:
• Having no SDL and UIF contribution costs calculated
• If the company’s rate/km is linked to the Prescribed rate/km, increases from year-to-year are easy.
6. The employee benefits from:
• No PAYE withholding to reduce take-home pay
• No UIF contribution on the travel reimbursement
• No logbook or ITR12 obligation for travel declaration.
Alternatively, If the employer’s rate/km is greater than the Prescribed rate/km:
1. There will be a portion that is remuneration subject to PAYE, SDL, UIF, ETI etc.
2. The tax certificate will contain the following codes:
a. Code 3702: The income portion (amount up to the Prescribed ratekm)
b. Code 3722: The remuneration and income portion (amount above the Prescribed ratekm)
3. The total travel reimbursement (code 3702 plus code 3722) will be assessed for income tax
4. The employee must keep a logbook and submit the details on his ITR12
5. The difference in the value calculated at the employer’s rate/km and the Cost Scale rate/km used by SARS will result in either an assessment or a refund of income tax.
If the employer’s rate/km is greater than the Prescribed rate/km, and if the cost scale rate/km of the employee’s vehicle is less than the employer’s rate/km, it would be best to reduce the employer’s rate/km to the Cost Scale rate/km of the employee’s vehicle to prevent the employee from being assessed for income tax on the excess value resulting from the employer’s rate/m being above the Cost Scale rate/km.