They reimburse employees for company expenses paid privately. They fill in a claim form and then the amounts are refunded. It has now come too light that the situation has changed and most of these expenses that are being refunded is for petrol that the e
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The general principle is that where an employer reimburses an employee (or gives an advance to) the employee will not have to include the amount in taxable income. This of course only applies where the expenditure was incurred on instruction of the employer (the principal) and the recipient (employee) must produce proof of having incurred the cost. With a reimbursement of expenditure incurred on travelling on business it is difficult to determine the amount of the cost (it can realistic only be determined at the end of the year) and the Act deals with it specifically. In such a case, the general principle is that amount is then included in taxable income and will be reduced on assessment.
With regard to a reimbursement based on actual distance travelled section 8(1)(b)(iii) is relevant. The intention is not to subject the recipient to employees’ tax on the full amount and also to give the reduction at the moment of the reimbursement. Section 8(1)(b)(iii) doesn’t only refer to the R3,55 (since 1 March 2017). In the first place, it refers to the actual cost (the Act uses the words “amount expended”) and then, when it is not available (the Act refers to “unless the contrary appears”) only does it refer to the Government Gazette rates. The simplified rate (the R3,55 where less than 12 000 kilometres was travelled) is merely one of the rates. The simplified rate doesn’t apply if other compensation in the form of a further allowance or reimbursement (other than for parking or toll fees) is payable by the employer to that recipient. It also requires a rate per kilometre (and not based on fuel used).
The Fourth Schedule specifically excludes from remuneration any amount paid or payable to any employee wholly in reimbursement of expenditure actually incurred by the employee in the course of his (or her) employment. SARS, in their guide to employers confirms that reimbursements of travel cost are not subject to the withholding of employees’ tax.