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If you've opted for a company car, here's the ultimate rule for taxing private use

by , 08 July 2014
Congratulations on the purchase of your new company car. Now all that's left to do is to hand it over the employee who'll use it and get it on the road.

But before you do, are you up to speed on how to tax your employee on his private use of that company car?

Let me explain...

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Here's how the fringe benefit tax on the company car works

 
 
The reason for this is he gets an added extra that helps him outside of his job. This means he must pay tax on his private use of the car. 
 
This is why it's very important for him to keep an accurate logbook that shows how much of his use is for work and how much is private.
 
You can use this to help you when you work out his fringe benefit tax
 
When you do this, you must apply to golden rule of 3.5%...
 

Here's how the golden 3.5% rule applies to your employee's private use of the company car

 
The golden rule says your employee must pay 3.5% of the value of the benefit. So if the car's value is R100 000 then your employee's tax is 3.5% of R100 000. 
 
 
The tax on your employee's private use of your company car is that simple.
 
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