The use of a company car is one of the most common examples of a fringe benefit. But, the rules for the Vat on this perk, are different to those for other perks
This happens because the cash equivalent for income tax purposes includes both a capital cost and a running cost element.
Moreover, note that when your company buys the car, SARS denies any input tax deductions. And fuel isn't subject to Vat.
Thus, from a Vat point of view, you can only redeem the private use of the car and the repairs, maintenance and insurance costs.
Use this specific formulas to calculate the value and Vat liability for the private use of the company car:
• Where the vehicle is a car and the input tax was specifically denied, the calculation is as follows: 0.3% x the determined value of the car x 14/114 = output Vat payable.
• For any other vehicles (e.g. bakkies), the calculation is: 0.6% x the determined value of the car x 14/114 = output Vat payable.
• If your employee pays in full for the repairs to or maintenance of the vehicle, the calculated amount may be reduced by R85 per month.
• If your employee contributes an amount to you for his private use of a company vehicle, the contribution must be allocated to the items to which it relates.
Keep in mind that if he contributes to fuel costs, then there's no reduction, since fuel is zero-rated. But if he contributes to the cost of maintenance, then you can reduce the contribution. The determined value of the vehicle is the price excluding Vat and finance charges.
*********** Best Seller ***************
Getting your VAT refund from SARS just got harder…
A small administrative mistake is all it takes for SARS to have the right to withhold your refund.
Put a simple zero in the wrong place on the new VAT return could and you can forget about getting even a cent of your money back.
Make sure this never happens to you by filling in the new VAT return 100% correctly every, single time.
I'll show you how here.
Bonus tip: How to declare the output tax on your Vat201 return, to avoid penalties
You must declare the output tax on fringe benefits in block 18 (Tax on adjustment – other) on the Vat 201 return.
And here's another tip on how to benefit once you've bought your car: Even if the input tax on your motor car purchase isn't allowed, you can still benefit going forward.
Claim the Vat on any repairs, maintenance, insurance, toll fees, parking and general running costs of your motor car.
This includes the use of the car as a fringe benefit. But be warned: You must use the car while making taxable supplies.
Also, don't forget to claim the input tax on modification and installation costs to your vehicle. If you add a canopy to your bakkie or install hands-free cell phone kits in your delivery vehicles or reps' cars, claim back the input tax