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Deemed rate per kilometre in the calculation of the section 11(a) deduction for business travel

14 October 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Deemed rate per kilometre in the calculation of the section 11(a) deduction for business travel expenses

Q: My understanding of a note in Interpretation Note 14, with regards to travel deduction under section 11(a) where income is mainly derived from commissions based on sales or turnover, is that the actual expenditure has to be used.

Will this therefore mean that the deemed rate per kilometre as set out by the Minister of Finance in the Gazette, may then not be used in instances where no travel allowance reflect on the tax payer’s IRP5 and all income were derived from commission?

A: We agree with you.

Firstly, section 11(a) is a deduction for expenditure "actually incurred”. It makes no provision for deemed expenditure, unlike the allowances in section 8 of the Income Tax Act. 

In addition, page 19 of the SARS INTERPRETATION NOTE: NO. 14 (Issue 3) on ALLOWANCES, ADVANCES AND REIMBURSEMENTS states the following at 5.5:

5.5 Deduction under section 11(a)

Section 23(m) generally prohibits employees and office holders from claiming a deduction for business-related travel expenditure under section 11(a).

There are limited circumstances, for example, an agent or representative whose remuneration is mainly derived from commissions based on sales or turnover, who are not automatically prohibited by section 23(m) from deducting business-related travel expenditure under section 11(a). (emphasis mine)

Taxpayers who are not subject to section 8(1), for example, an independent contractor (see 5.1.1), may seek to claim business-related travel expenditure under section 11(a). In this regard the calculation of the deduction available, assuming all the requirements of section 11(a) are met, must be based on actual expenditure and actual business kilometres travelled. Taxpayers seeking to claim a deduction bear the onus of proving that the amount is deductible and, if required, will need to produce proof of the expenditure incurred and the business kilometres travelled. See 5.4.2 for details on what SARS considers to be accurate written records of business kilometres travelled. A method which merely regards, for example, 20% of total travelling expenses as private is not acceptable. (emphasis mine)

This further strengthens the case for our view that the deemed rate per kilometre as set out by the Minister of Finance in the Gazette may not be used in the calculation of the section 11(a) deduction in this particular instance. 

Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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