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There are four requirements a company car must meet to be tax-free! Know what they are so you always handle this fringe benefit tax correctly

by , 13 January 2015
You know that if your employee gets to use the company car for private travel, it's a taxable fringe benefit. And this means you must account for fringe benefit tax.

What you may not know is there are certain instances where a company car isn't a taxable fringe benefit.

It's important you know what these are. If you don't, you could end up handling fringe benefits tax incorrectly. And SARS will charge you penalties for this.

Since that's a risk you can't afford to take, keep reading to discover the four requirements a company car must meet to be tax-free.


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Find out how to make sure every time you offer a fringe benefit to your employees you'll know if it's taxable or not and how to tax it correctly.
 
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Four criteria a company car must meet to be tax-free

 
According to The Fringe Benefit Guide All South African Companies Must Have, your employee's private use of a company car is tax-free if it meets these requirements:
 
1. The car is available to all your employees for their general use (for example, a pool car);
 
2. The private use of the car is infrequent or is merely incidental to its business use;
 
3. You don't normally keep the car at or near the employee's home when not in use; or
 
4. The nature of your employee's duties mean he has to use the vehicle regularly to do his job outside of normal working hours.
 
If your company car meets these requirements, it's tax-free! This means, in this instance, you don't have to worry about withholding fringe benefit tax.
 

It's crucial you handle fringe benefits correctly

 
According to our tax experts, there are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them.
 
In the end, they set themselves up for SARS penalties.
 
To avoid this, get The Fringe Benefit Guide All South African Companies Must Have. A team of five of our tax experts with more than 51 years of experience in the South African tax industry put it together to show you which fringe benefits are tax free, how to handle fringe benefits tax, fringe benefits you can take advantage of and some much more.
 
There you have it: Knowing the four requirements a company car must meet to be tax-free is the first step to handling fringe benefit tax correctly so you avoid SARS penalties.

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