If an employee makes use of a company vehicle owned by the employer, the taxable value of the vehicle must be added to the employee’s remuneration each month.
The fringe benefit value is calculated as a percentage of the determined value of the car (as per the SARS guide here) and the percentage will depend on whether the original purchase price included a maintenance plan. The applicable percentages are as follows:
- Maintenance plan: 3.25% per month of the determined value
- No maintenance plan: 3.5% per month of the determined value
The fringe benefit value is either 80%, 20% or 100% taxable, depending on the proportion of private use:
- If the vehicle is used 80% or more for business purposes, the value of the company car benefit is 20% taxable.
- If the vehicle is used less than 80% for business purposes (but there is some business use), the value of the company car benefit is 80% taxable.
- If the vehicle is used 0% for business purposes (i.e. it is only used privately), the value of the company car benefit is 100% taxable.
SimplePay has a built-in item to accommodate the special tax and reporting requirements related to a company car. This income will be reported under code 3802.
Please Note: In order to qualify for these reductions, employees must maintain detailed records of business travel, generally in the form of a logbook. SARS may assess whether the employee has kept accurate records of the distances travelled for business purposes and determine if a reduction will be applied.
- Go to Employees on the left-hand menu and select the relevant employee.
- Click on Add next to Regular Inputs.
- Select Company Car under Benefit.
- Enter the deemed value of the vehicle, as calculated per the SARS guide.
- Indicate whether the vehicle includes a maintenance plan, as this influences the percentage of the taxable value.
- Select the Taxable Percentage as “80%” or “20%”, based on the employee’s use of the vehicle (this can be determined by the employee’s logbook). Alternatively, select “100% (i.e. no business use)” if the company car is used only for private purposes and no logbook is kept.
- Click Save.