EXTERNAL DOCUMENT
FAQ - Company Cars on VIP
TAX YEAR 2011/2012
FRINGE BENEFITS: USE OF A MOTOR VEHICLE
Amendments to the Income Tax Act indicate that:
•
The taxable value is 3.5% of the determined value (the cash cost including VAT) per month of
each vehicle. Where the vehicle is the subject of a maintenance plan at the time that the
employer acquired the vehicle the taxable value is 3.25% of the determined value.
•
80% of the fringe benefit must be included in the employee’s remuneration for the purposes of
calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least
80% of the use of the motor vehicle for the tax year will be for business purposes.
•
On assessment the fringe benefit for the tax year is reduced by the ratio of the distance
travelled for business purposes substantiated by a log book divided by the actual distance
travelled during the tax year.
•
On assessment further relief is available for the cost of license, insurance, maintenance and
fuel for private travel if the full cost thereof has been borne by the employee and if the
distance travelled for private purposes is substantiated by a log book.
What do I need to do on the Payroll?
Step 1 – Calculate the new determined car value for all employees with company cars
The calculation of the determined car value changed and will require all users to enter new determined
car values from their first pay period in the new (2011–2012) tax year.
o
o
When the company bought the car (sale) or an exchange was concluded at arm’s length:
- The original cost to the employer, excluding finance charges or interest but
including VAT and the value of a maintenance plan.
When the company leases the car:
- The retail market value at the time the employer first obtained the right of use,
or cash value including VAT and the value of a maintenance plan.
Depreciation of 15% per annum for each completed 12 month period between the dates the employer
first obtained the use of the vehicle to the date the employee first obtained the use of the vehicle is still
allowed on the determined car value.
Step 2 - Enter the determined car value on the Payroll where applicable
Once you have done a start of period to the new Tax year, enter the determined car value on the perks
tax screen of the applicable employees.
Classic/Essentials: Access the Perks Tax Screen, click on the Company Car button and input the
calculated value on line S or T.
Premier:
Access the Perks Tax Screen and input the value on line 18 or 19.
Step 3 – Indicate if a maintenance plan was included in the determined value
After entering the determined car value on the perks tax screen of the applicable employees, remember
to “tick” the “include maintenance plan” option on the same screen if applicable to the specific car.
Classic/Essentials: Access the Perks Tax Screen, click on the Company Car button and “tick” the
maintenance plan fields if applicable.
Premier:
Access the Perks Tax Screen and “tick” the maintenance options at the
bottom of the screen if and where applicable.
Copyright © 2011
Version: 1.0
Last saved on: 2011/02/25
Page 1 of 2
Created by: Estelle Barnard
Released by: Karen Schmikl
EXTERNAL DOCUMENT
FAQ - Company Cars on VIP
Step 4 – The system will calculate the “Cash Equivalent” of the company car
As from March 2011, the fringe benefit value is 3.5% of the determined value or 3.25% if the
determined value includes a maintenance plan. These percentages are used for all vehicles. No further
reduction in percentage is allowed anymore.
The system will automatically calculate the Cash equivalent by multiplying the determined car value with
the applicable percentage.
Step 5 – Indicate the percentage to use for the calculation of the taxable amount
Par (cB) was added to the definition of remuneration in the Fourth Schedule: The fringe benefit is now
80% taxable, unless the employer is ‘satisfied’ that at least 80% of the use of the motor vehicle will be
for business purposes, then the fringe benefit is 20% taxable.
The default value included for Tax calculation purposes will be 80%. If you want to change the
percentage:
On the IS Screen of the employee, access the “Travel and Co. Car” Tab. At the bottom of the
screen on the company car 1 and 2 lines, select the required percentage in the Current % field.
Please note: This will only affect the taxability in the current period
Example of Calculation
The employer bought a vehicle in January 2009 for R100 000.00 excluding VAT. They also bought a
maintenance plan which cost R5 000.00, excluding VAT. The employee pays for all fuel.
The employee starts using the vehicle in February 2011.
Up to Feb 2011
R 100 000.00
From March 2011
R
100 000.00
R
5 000.00
R
14 700.00
Less Depreciation of 15% per year
1st Year – 2009
2nd Year -2010
Determined Car Value:
____________
R
15 000.00
R
12 750.00
R
72 250.00
______________
R
17 955.00
R
15 261.75
R
86 483.25
Percentage to be used:
2.5%
0.22%
2.28%
1 647.30
x
3.25%
Cash value:
x
=
R
R
_
2 810.71
Taxable value (2011) based on 80%
Taxable value (2010)
R
1 647.30
Company Car Purchase price:
Maintenance Plan:
Vat – 14%
R
2 248.57
The determined car value that needs to be entered for the 2011/2012 tax year is: R86 483.25
All other calculations will be done by the system.
A logbook should be kept in order to claim fuel costs on assessment.
Copyright © 2011
Version: 1.0
Last saved on: 2011/02/25
Page 2 of 2
Created by: Estelle Barnard
Released by: Karen Schmikl