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Two ways to easily shrink the fringe benefit tax your employee pays on his company car

by , 13 August 2014
Company cars are every employee's favourite company benefit. But they come with that pesky fringe benefit tax, which means the employee still has to pay for it each month.

But there's good news. You can legally shrink your employee's fringe benefit tax on the car. Both ways are simple and won't land you and your employee in trouble with SARS either.

Here's what you can do...

 

#1: Shrink your employee's fringe benefit tax on his company car with a logbook

 
A logbook is a vital tool when it comes to shrinking your employee's fringe benefit tax. The reason is the logbook can prove your employee uses the car for business 80% of the time.
 
If your employee's use of the car is 80% for business, you can cut his fringe benefit tax by up to 60%. That's a huge decrease.
 
This means your employee will only pay tax on his private use of the car.
 
This is easy and completely legal so just get your employee to keep a clear and accurate logbook.
 
But here's another way to shrink your employee's fringe benefit tax...
 
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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...

This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!
 

***********************************
 

#2: Shrink your employee's fringe benefit tax on his company car with depreciation

 
As the value of the car depreciates, so should your employee's tax bill. The reason is your employee pays tax on the value of the car. So when this value is less, he pays less tax on it.
 
You can write-off the car's depreciation each year and adjust your employee's tax. Have the car revalued each year to ensure the value is correct.
 
With these two tips your employee can use your company car and pay less tax at the same time.
 


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