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Is a company car a fringe benefit?

by , 21 July 2015
Before you can file your tax return, you need to determine if the use of your car by an employee is a fringe benefit.
Take a look at the criteria below and if it's a fringe benefit it is subject to tax.
There is one formula you use to calculate the tax on fringe benefits. But there's one exception: Company cars. The tax calculation on this fringe benefit has an extra twist to it. Read on to find out what this twist is, so you don't make costly mistakes on your tax returns.

Let's first look at the criteria on company cars

 
A vehicle is a company car, if: 
 
It's available and used by employees in general,
The employee uses it ,
Its personal use is incidental to its business use,  and
Your employee doesn'tkeep it at, or near, his home outside of working hours.
 

Consider these criteria to see if it's a fringe benefit

 
When looking a fringe benefit, the opposite applies. It's a car your company provides that:
 
The employee sometimes enjoys private use of,
The employee's use is not business-related, and
An employee takes it homewith him.
 
If your employee uses it for these reasons, then it's a fringe benefit and it's taxable 
 
******* Look at this *********
 
On 1 March every year the Tax laws change. 
 
And you need to make sure you implement the changes correctly, so you don't make mistakes and cost your company money.
 
Why not consult The Practical Tax Loose Leaf Service?It's a full service tax consultancy you will useevery day!
 
***********
 
 

Here's the formula to calculate tax on a car, as a fringe benefit

 
Cost of the company car (the initial cost) 
0.3%
 x
14/114 
output tax payable
 
Let's put the formula into practice  
 
Diva Divine Dance Co.gives cars to all their sales reps. each car costs R200 000. 
 
The calculation:
 
R200 000
X
0.3%
= R 736.84
 
 
Now you know how to determine whether a company car is a fringe benefit and how to calculate the tax on it. Remember this when filing your next return and avoid making any blunders.  
 

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