If an employee receives a travel allowance (taxable at 20%) and also claims fuel expenses, should the fuel expenses also be taxed at 20%? If these expenses must not be taxed, why?
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The practice generally prevailing is that “in the context of travel, an allowance or advance includes both a travel allowance and a travel reimbursement…” The footnote explains that a travel reimbursement is “actual business kilometres travelled x an employer agreed rate per kilometre.”
The practice generally prevailing continues to state that:
“All allowances or advances, … required to be included in taxable income under section 8(1)(a)(i) must be included in remuneration for the purposes of employees’ tax.
Reimbursement of actual expenditure is not subject to employees’ tax.”
We don’t agree with your statement that the individual “must be taxed at 20%”.
The practice generally prevailing this principle as follows:
“The definition of the term “remuneration” in the Fourth Schedule to the Act was amended with effect from 1 March 2010 to include 80% of the travel allowance or advance as remuneration. However, in the event that an employer is satisfied that at least 80% of the use of the motor vehicle for a year of assessment will be for business purposes, only 20% of the travel allowance or advance is included as remuneration and is subject to employees’ tax.”
“This does not mean that only a portion (80% or 20%, as the case may be) is subject to tax. The full allowance or advance is potentially taxable if the taxpayer is unable to claim a sufficient deduction for business travel when submitting his or her annual tax return. It is only for the purposes of employees’ tax that 80% or 20%, as the case may be, is included in remuneration.”