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Are travel reimbursements considered ‘remuneration’ for UIF purposes?

17 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Travel allowance (SARS code 3702) is taxed on assessment and is not subject to PAYE. As UIF is calculated on gross taxable earnings would travel reimbursements in this category be considered UIF earnings?

We don’t normally include this in UIF earnings as it is not taxable on payroll, but strictly speaking is this is a taxable earning?

A: In terms of the Unemployment Insurance Contributions Act, 2002 (section 6) the amount of the contribution payable is one per cent of the remuneration paid or payable to that employee.  In terms of section 1 of that Act "remuneration” means "remuneration” as defined in paragraph 1 of the Fourth Schedule to the Income Tax Act, but does not include any amount paid or payable to an employee -

(a) by way of any pension, superannuation allowance or retiring allowance;

(b) which constitutes an amount contemplated in paragraphs (a), (cA), (d), (e) or (eA) of the definition of "gross income” in section 1 of the Income Tax Act; or

(c) by way of commission.  

Remuneration (in the Income Tax Act – Fourth Schedule) specifically includes a portion "of the amount of any allowance or advance in respect of transport expenses referred to in section 8(1)(b), other than any such allowance or advance contemplated in section 8(1)(b)(iii) which is based on the actual distance travelled by the recipient, and which is calculated at a rate per kilometre which does not exceed the appropriate rate per kilometre fixed by the Minister of Finance under section 8(1)(b)(iii)”. 

Code 3702 is to be used for "a reimbursement for business kilometres exceeding 8 000 kilometres per tax year or at a rate exceeding the prescribed rate per kilometre or the employee receives any other form of compensation for travel.”

Section 8(1)(b)(iii) applies "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”. 

In such a case it would then not be remuneration and no unemployment insurance fund contribution is determined on that amount. 

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. 


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