How is the provision of a company car and accommodation taxed?
01 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: A company
employs a person specifically because of his skills to perform work on a site
away from his ordinary place of residence. The employee is provided with a
vehicle, owned by the company, to be used for moving around on site. The
vehicle will be used 99% of the time for business purposes. The employee will
also be provided with accommodation while he is on site.
Query 1: Will the
employee be taxed in terms of paras 2(b) and 7 of the Seventh Schedule on the
private use of a motor vehicle in this case?
Query 2: If the
employee is not taxed on the right of the private use of a motor vehicle, and
the company gives him a petrol card to pay for his fuel, will this be taxed as
a fringe benefit?
Query 3: Is there
a difference for PAYE purposes when an employee is given a petrol card for his
fuel, or whether he is reimbursed for his fuel expenses?
Query 4: Will the
accommodation provided by the employer for the employee while he is on site
specifically to perform the job he was appointed for, be taxed as a fringe
benefit in the hands of the employee?
Query 5: When the
company pays for the employee to go home to his family once a month, will this
be taxed as a fringe benefit?
A: You are
reminded that the service offered by SAIT is limited to guidance only.
Free use of employer
owned motor vehicle
The problem here is to determine whether or not a taxable benefit
has arisen when the employee has been granted the right to use the motor
vehicle for his or her private or domestic purposes either free of charge or
for a consideration payable by the employee which is less than the value of
such use, as determined under paragraph 7 of the Seventh Schedule. The current practice prevailing
(Interpretation note 72) is that "private use includes travelling between the
employee’s place of residence and place of employment”. We accept that this is the 1% use that you refer
to. Paragraphs 7(7) and 7(8) of the 7th
Schedule allows for the amount of the taxable benefit to be reduced, but it
requires a logbook.
We don’t have enough information to comment on whether the
benefit will qualify for the nil value – paragraph 7(10). It may be that the use is infrequent or
merely incidental to the business use of the vehicle.
The petrol card given to pay for the fuel of the vehicle
will not be taxed if it is an allowance to pay expenses on behalf of the
employer. There would only be a
difference if the card is given to a person in receipt of a travel allowance
(or who makes a deduction under section 8(1)).
ordinary place of residence and place of work
Such a benefit will only have a nil value (paragraph 10(2)
of the Seventh Schedule) if the any travel facility granted by an employer to
the spouse or any minor child of an employee if—
(i) that employee is for the duration of the term of his or
her employment stationed for purposes of the business of that employer at a
specific place in the Republic further than 250 kilometres away from his or her
usual place of residence in the Republic;
(ii) that employee is required to spend more than 183 days
during the relevant year of assessment at that specific place for purposes of
the business of that employer; and
(iii) that facility is granted in respect of travel between
that employee’s usual place of residence in the Republic and that specific
place where the employee is so stationed.
As this is granted to the employee the risk is that the
transport service is not provided to employees in general and that it will be a
This is a paragraph 2(d) benefit. It will only qualify get a nil value if
either of paragraph 9(7) applies. We
copied it below for your convenience:
(7) No rental value shall be placed under this paragraph on
any accommodation away from an employee’s usual place of residence in the
Republic provided by his employer while such employee is absent from his usual
place of residence in the Republic for the purposes of performing the duties of
his or her employment: Provided that the preceding provisions of this
subparagraph shall not apply in respect of any residential unit referred to in
Paragraph 9(6) is not applicable – it provides that where
any employee has been provided by his employer with residential accommodation
consisting of two or more residential units situated at different places which
the employee is entitled to occupy from time to time while performing his
duties the cash equivalent of the value of the benefit of such units which
shall be included in the gross income of the employee shall be the value of the
unit with the highest rental value determined under subparagraph (2) over the
full period during which the employee was entitled to occupy more than one
Disclaimer: 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.