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ONE instance SARS will let you reduce the fringe benefit tax on your company car from 80% to 20%

by , 17 June 2014
Your employee's private use of the company car is a perk (i.e. a fringe benefit). You must deduct Pay As You Earn (PAYE) on the value of the private kilometres, which your employee travels in the company car.

The good news is there's a way to reduce that fringe benefit tax from 80% to 20%.

Read on to find out one instance when SARS will allow you to do this.

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Yes, you can reduce the fringe benefit tax on the private use of the company car from 80% to 20%

The ONLY instance where the taxman will let you reduce the fringe benefit tax on the private use of the company car from 80% to 20% is if your employee uses the car MOSTLY for business.

Confused?

Let's say you have a team of consultants who spend their days travelling between clients' premises. They only stop in at the office once or twice a week to chat to you and keep you up to date on things.

You decide to give each consultant a company car and tell them to keep a logbook.

Since your employees use the cars so heavily for business, you can reduce the fringe benefit from 80% to 20% when you tax this perk. ONLY if they have a logbook that proves more than 80% of their travel is for business purposes.

If you want a practical example of how to reduce the fringe benefit tax on the private use of the company car from 80% to 20%, check out the Practical Tax Loose Leaf Service.

But be warned: Don't apply the 20% taxation option under these circumstances…
 

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- 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.

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Don't try to apply the 20% taxation option if your employee can't prove 80% was business travel

SARS will disallow this and could slap you with penalties! So make sure ALL your employees keep an accurate logbook so you can justify all your actions.



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