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Fringe Benefits | South Africa Tax Guide 2006

Traveling allowance ... For the tax year ending 2007

Rates per kilometre which may be used in determining the allowable deduction for business-travel, where no records of actual costs are kept.

Of the actual distance travelled during a tax year, in the absence of a log book, it is deemed that the first 18 000 kilometres are travelled for private purposes and the balance, but not exceeding 14 000 kilometres, are travelled for business purposes. 60% of the travelling allowance must be included in the employee's remuneration for the purposes of calculating PAYE.

Note :  The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

Where the value of the vehicle is  (including VAT)	Fixed cost R p.a.	Fuel cost c/ km	Maintenance cost c/ km
0                  -  R 40 000	15 364	47.3	22.5
R 40 001                -  R 60 000	20 910	49.4	26.2
R 60 001                -  R 80 000	25 979	49.4	26.2
R 80 001                -  R 100 000	31 513	54.8	30.5
R 100 001              -  R 120 000	36 978	54.8	30.5
R 120 001              -  R 140 000	41 771	54.8	30.5
R 140 001              -  R 160 000	47 512	57.2	39.8
R 160 001              -  R 180 000	52 629	57.2	39.8
R 180 001              -  R 200 000	58 334	65.9	43.8
R 200 001              -  R 220 000	64 591	65.9	43.8
R 220 001              -  R 240 000	69 072	65.9	43.8
R 240 001              -  R 260 000	74 777	65.9	43.8
R 260 001              -  R 280 000	79 918	69.3	52.5
R 280 001              -  R 300 000	85 440	69.3	52.5
R 300 001              -  R 320 000	88 793	69.3	52.5
R 320 001              -  R 340 000	95 218	69.3	52.5
R 340 001              -  R 360 000	100 011	77.1	68.0
exceeding   R 360 000	100 011	77.1	68.0

Alternatively:

• Where the distance travelled for business purposes does not exceed 8 000 kilometres per annum, no tax is payable on an allowance paid by an employer to an employee, up to the rate of 246 cents per kilometre regardless of the value of the vehicle.
• This alternative is not available if other compensation in the form of an allowance or reimbursement is received from the employer in respect pf the vehicle.

Employer- owned vehicles

• The taxable value is 2.5% of the determined value (usually the cash cost excluding VAT) per month. Where a second (and further) vehicle is made available to an employee or his family, and the vehicle is not used primarily for business purposes, the benefit is 2.5% per month on the vehicle with the highest value and 4% per month on the other vehicle (s).
• Where the employee bears the cost of all fuel used for the purposes of the private use of the vehicle ( including travelling between the employee's place of residence and his/her place of employment) the monthly percentage to be applied is reduced by 0.22 percentage points.
• If the employee bears the full cost of maintaining the vehicle (including the cost of repairs, servicing, lubrication and tyres) the monthly percentage to be applied is reduced by 0.18 percentage points.

Holiday accommodation provided by the Employer

Employee taxed on -

• Lower of R100 per day or prevailing market rate
• All costs incurred if accommodation is hired by Employer

Subsistence allowance

The unexpended portion of any allowance given to an Employee for expenses for personal subsistence and incidental costs, e.g. -

• Accommodation and meals is subject to tax if required to spend at least one night away from home.
• In order to simplify the administrative procedures, the amount in excess of the limits described below is taxable.

Overseas travel

• At the discretion of CIR, who currently allows actual accommodation costs plus $190 per day for meals and incidental costs.
• This only applies for continuous periods outside the Republic not exceeding six weeks.
• Where this period is exceeded, allowance paid must be declared in full on Employee's Tax Certificate and Employee must claim his/ her actual expenditure as a deduction.

Local travel | South Africa Tax Guide 2006

The deemed expenditure provision will be limited to the subsistence and incidental cost allowance of R196 per day for local travel.

Residential accommodation

Supplied by Employer - Determined by formula: (A-B) x C/100 x D/12:

A =  Remuneration ( excluding any use of motor vehicle, or entertainment or travel allowances)

B =  R 20 000

C =  17 ( at least 4 rooms)

C =  18 ( at least 4 rooms, power / fuel supplied by Employer)

C =  19 (at least 4 rooms, furnished, power / fuel supplied by Employer)

D =  Number of months of occupation

Any rental payment to Employer by Employee reduces formula determination

Low interest / interest free loans

• Amount taxed is difference between interest payable on the loan by Employee and official interest rate
• Subsidies taxed in full
• Short term loans, not granted regularly, not granted to all Employees, not in excess of  R3 000, are not taxable benefits
• Study loan to further Employee's own studies is not a taxable benefit.

Other benefits

The act provides for the taxation of the following fringe benefits -

• Medical aid contributions
• Benefits from share incentive schemes
• Acquisition of any assets at less that market value including marketable securities
• Right of use of any assets
• Meals and refreshments
• Benefits granted to retired Employees
• Free or cheap services
• Housing subsidies and subsidy schemes
• Payment or release from payment of Employee's debts

Exemptions

The act provides for the following exemptions from fringe benefit taxes

• Special uniforms
• Transfer and relocating costs
• Share incentive schemes ( under certain circumstances)
• Study loans and bursaries

Contributions to : Pension, Retirement Annuity & Provident Funds

Pension funds

Any person may claim a deduction of his current contributions to a Pension Fund. The deduction is limited to the greater of -

• R1750 -or -7.5% of remuneration from retirement funding employment

A maximum deduction of R1 800 per annum is allowable for the arrear contributions to a Pension Fund. Arrear contributions may be deducted from non-trade income.

Retirement Annuity Funds

A taxpayer may claim his current contributions to a Retirement Annuity Fund as a deduction which is limited to the greater of-

• 15% of income from non-retirement funding employment sources
• R3 500 less any amount allowed for current Pension Fund contributions - R 1 750

The maximum deductions of contributions with regard to the reinstatement of membership of a Retirement Annuity Fund is R1 800 per annum

Provident Funds

Contributions to Provident and Benefit Funds are not allowed as deductions from the taxpayer's income.