If an employee makes use of a company-owned car, the taxable value of the vehicle must be added as a benefit to the employee’s remuneration each month.
The fringe benefit value is calculated as a percentage of the determined value of the car (as per the SARS guide here), and the percentage will depend on whether the original purchase price includes a maintenance plan. The applicable percentages are as follows:
- Maintenance plan: 3.25% per month of the determined value
- No maintenance plan: 3.5% per month of the determined value
The fringe benefit value is 80%, 20%, or 100% taxable, depending on the proportion of private use:
- If the vehicle is used 80% or more for business purposes, the value of the company car benefit is 20% taxable.
- If the vehicle is used less than 80% for business purposes (but there is some business use), the value of the company car benefit is 80% taxable.
- If the vehicle is used 0% for business purposes (i.e., it is used only privately), the value of the company car benefit is 100% taxable.
SimplePay has a built-in item to accommodate the special tax and reporting requirements related to an employer-owned motor vehicle. This benefit will be reported under code 3802, and the taxable percentage will be reported under code 4582.
Please note: In order to have less than 100% (i.e., only 20% or 80%) of their company car benefit taxed, employees must maintain detailed records of business travel, generally in the form of a logbook. SARS may assess whether the employee has kept accurate records of the distances travelled for business purposes and determine whether less than 100% of the company car benefit will be taxed.
To add a company car to an employee’s profile:
- Go to Employees, and select the relevant employee.
- Click on Add next to Regular Inputs.
- Select Company Car under Benefit.
- Enter the determined value of the vehicle, as calculated per the SARS guide.
- Indicate whether the vehicle includes a maintenance plan, as this influences the percentage of the taxable value.
- Select the Taxable Percentage as “80%” or “20%”, based on the employee’s use of the vehicle (which can be determined based on the employee’s logbook). Alternatively, select “100% (i.e. no business use)” if the company car is used only for private purposes, and no logbook is kept.
- Click Save.
Multiple Company Cars
On SimplePay, it is possible to have two or more company cars added to an employee’s profile. To do so:
- Follow steps 1-5 as outlined above.
- Select the Taxable Percentage as “80%”, “20%” or “100% (i.e. no business use)”. Note that this should match the Taxable Percentage of the other company car(s) already added to the profile.
- Click Save.
Please note: The private use percentage must be the same for all company cars used by a particular employee. There cannot be a different percentage subject to PAYE for this benefit as it relates to the requirement of the employee to travel for business purposes.