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"Company Director buys a company car. How do we tax this?"

Our company intends to sell its company car to its non-executive directors at a price below market value. Since these directors do not receive regular income from the company, can our company be released from the obligation of recovering the tax from these directors and paying it over to SARS. How do we ensure that the directors will pay over this tax directly to SARS?

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 User  gronie asked on 23 Oct. 2013


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Alan Lewis
 Expert Alan Lewis answered question on 01 Nov. 2013
In the event that these directors are employees of the company for the purposes of employees’ tax, this transaction would be one in terms of which they receive a taxable fringe benefit, as they receive the vehicles at less than their market value. Consequently, they would be liable to employees’ tax on the difference between the market value, and the sale price.

In the alternative, the difference in price could be seen as a donation by the company to the directors, which is subject to donations tax, which the company would have to pay.

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