The company car fringe benefit arises when an employer gives an employee the right to use a company vehicle privately. The private-use value is a taxable benefit added to the employee's remuneration.
What it means
Because private use of a company car has real value, SARS taxes it. The monthly benefit is a percentage of the vehicle's determined value - generally 3.5%, or 3.25% where a maintenance plan is included. Reductions can apply for business travel and for costs the employee bears, claimed largely on assessment against a logbook.
Where it fits in
The benefit is a fringe-benefit component added to the PAYE base each month, with a portion (usually 80%) included for PAYE, similar to a travel allowance. It is an alternative to paying a travel allowance, and the choice between them affects both tax and cost to company.
Key rules
- Taxes the private use of an employer-provided vehicle.
- Monthly value is 3.5% of determined value, or 3.25% with a maintenance plan.
- Usually 80% is included for PAYE, with logbook-based relief on assessment.
- An alternative to a travel allowance, with different tax outcomes.
