When it comes to dealing with your employee's company car use, you need to be careful. The reason for this is if you deal with it incorrectly you could get his fringe benefit tax wrong.
This means you're either going to over-tax him, which will make him angry, or you'll under-tax him and that'll get you in serious trouble with SARS.
To avoid issues with irate employees or, worse, SARS, ensure you never make this assumption about your employee's company car usage...
Making this assumption about your employee's company car usage could land you in serious trouble
Never assume your employee only uses the company car for business.
After all, even if your employee uses the car for business all day, he may still use it to drive home at the end of the day. That counts as private use.
This is a dangerous assumption because your employee must pay fringe benefit tax on his private use of the car.
And if you calculate your employee's tax incorrectly because you made this assumption, it could lead to a big discrepancy in what his tax should be.
It's easy to avoid this problem though, here's how.
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Get 69 solutions to the most challenging company car and travel allowance questions
If you don't know the answers to questions like:
- How often your employees should hand in their logbooks?
- If you're required to pay Vat on a company car your employee wants to buy?
- How to calculate travel allowances correctly to avoid being head hunted by SARS?
- If you can claim input tax on a vehicle you use for company purposes?
You're not only wasting unnecessary hours of time, but could also be making mistakes that SARS will hunt you down for.
Here's how you can avoid making this assumption about your employee's company car usage
Make your employee keep a logbook. In this logbook, he must detail his private and business kilometres in the company car.
He must also give clear reasons for his travel to help you confirm whether it was private or business.
You only take his private kilometres into account when you work out his fringe benefit tax.
You must check his logbook monthly when it comes time to calculate his taxes.
By doing this, you can avoid this deadly assumption and the problems that come with it.