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Four unusual company car uses and how to tax them

by , 03 July 2014
You know the basics of taxing a company car. You know if your employee uses it for private travel, it becomes a taxable fringe benefit and he must pay tax of 3.5% of the car's current value.

But what you may not know is there's a grey line between certain type of private use and business use. This is where the process of taxing the car gets complicated.

Today we want to help make the whole process more black and white. So we're revealing four unusual company car scenarios and how to tax them...

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Here's how to tax unusual uses of your company car

 
Scenario 1: Your employee only started to use the company car half way through the month
 
In this situation, you must adjust the tax amount for that first month so you employee doesn't pay for 30 days of use.
 
You can find a full example of how to do this here...
 
Scenario 2: Your employee doesn't use the company car full time
 
Let's say your employee goes overseas for business for half the month, this means he only used the car for two weeks that month. 
 
Be careful here! SARS won't allow you to try and reduce your employee's fringe benefit tax for this time. The only time you can do this is in the scenario above.
 
There are two more scenarios you need to know about...
 
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Scenario 3: If your employee mostly uses your company car for business travel

 
You can actually reduce your employee's fringe benefit tax by up to 60%, as long as he uses it MOSTLY for business travel. By 'mostly', we mean 80% or more of your employees use of the car must be for business.
 
 
In this scenario, you use the car with the highest value of private use to work out your employee's fringe benefit tax.
 
So there you have it: Four unusual company car use scenarios and how to tax them.

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