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3 Common tax questions regarding company cars

by , 21 December 2015
Does your company provide a company car for your employees?

If so, then this is for you!

Here are 3 common tax questions that are asked regarding company cars. So take a look and learn some great advice...

Question#1: What if the employee wants to buy the car from your company after their right to use it as a company car has come to an end?

If your company sells the car to her at market value, or at the depreciated value, then she won't have a tax liability.

But if your company sells the car at a price below the market value, then this is a taxable fringe benefit, and so she'll be taxed on this.
 
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Question#2: If your company buys a company car on behalf of an employee, and she they pays you back for it, is there tax saving here?

In the case of a financial lease, the lease will be registered in the employer's name, and so it's owned by the company and remains a company car, irrespective the intention that they employee will buy the car from the company.

If the company pays the premium on the employee's behalf, and recovers the premium from her without giving her a benefit, then she won't be taxed on this. This is because the premium would be as though the employee had paid it off herself.

Question#3: Can a VAT input tax deduction be claimed for a station wagon?

Yes, you can because a station wagon doesn't all under the definition of a 'motor vehicle'.

In other words, you can't claim an input tax deduction for any car your company buys. But a station wagon doesn't fall under the definition of a 'motor vehicle', in the VAT Act. And so you can claim input tax here.
 
Do you want to learn more common tax questions when it comes to company cars? Then subscribe to the Practical Tax Loose Leaf Service today. 

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