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[FAQ] Right of use of motor vehicle for office and non-office bound staff
- 12 November 2020
- Individuals Tax
- The Payroll Authors Group of South Africa
Background
A company has 500 fleet vehicles. These vehicles are assigned to individuals with different roles throughout the company. The majority of the vehicles are used for business purposes, where individuals have no choice but to use the company vehicle to perform their duties, as they are not office-bound.
The balance of the vehicles is assigned to individuals who do not have to use the vehicle for business purposes, as they are mostly office-bound. The individuals who are not office-bound are not taxed on the use of company vehicles, but the office-bound individuals are taxed on the use of company vehicle, based on the formula at 80%. Should the non-office bound individuals be taxed on the use of a company vehicle as well?
Answer
The Income Tax Act
In terms of the provisions of paragraph 7 of the Seventh Schedule of the Income Tax Act, a fringe benefit occurs when any employee has the right of use of a company vehicle.
Application of the principles
There is no limitation on this benefit with regards to office bound, non-office bound or percentage use for business purposes. However, after the value of the benefit has been determine, the provisions provide for either a 20% or 80% of the benefit value to be subjected to the deduction of PAYE (depending on the business use).
Where the non-office bound employees use the vehicle more than 80% for business purposes, only a 20% portion of the benefit value will be subject to the deduction of PAYE.
Please refer to SARS Interpretation Note 72 with regards to the use of a motor vehicle for more details.
Webinar Commentary
Further webinar commentary on Right of use of motor vehicle can be accessed here.