Revealed! Why a company car isn’t always a taxable fringe benefit

43984, 04 Sep. 2014

Tags: sars, paye, company cars

In terms of tax law, a company car is a car that your company provides for the business use and sometimes private use of an employee. Usually, your company covers all the costs of the car – from the cost of its purchase, to its maintenance costs.
You probably know that your employee’s private use of the company car is a perk (i.e. a fringe benefit). And this means you must deduct Pay As You Earn (PAYE) on the value of the private kilometres your employee travels in the company car.
What you may not know is a company car won’t always be a taxable fringe benefit in your employee’s hands.
Keep reading to find out when a company car isn’t a taxable fringe benefit so you’ll know exactly when not to worry about tax.
If your company cars pass this test, they’re not a taxable fringe benefit
If the following three criteria apply to your company cars, then there’s no taxable fringe benefit for your employee:
#1: The vehicle is available and your employees use it in general;
#2: Your employee uses the company car infrequently or their private use is just incidental to their business use; and
#3: Your employees don’t normally keep the car at or near their homes outside of working hours.
There you have it: If your company cars tick these three boxes, they’re not a taxable fringe benefit and you don’t have to worry about deducting PAYE.
Overall, when it comes to company cars, our advice is: Before you consider handing your top exec the keys to a company car, make sure you know how to treat the use of the car on your payroll. This way, you won’t end up under-deducting PAYE and getting harsh SARS penalties.

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