A taxable benefit shall be deemed to be granted where an employee is granted the right of use of any motor vehicle for private or domestic purposes.
The value of the taxable benefit shall be calculated on a monthly basis or each part of a month during which the employee was entitled to the use of the vehicle for private purposes (including travelling between the employee’s place of residence and his or her place of employment or any other travelling done for his or her private or domestic purposes).
However, when a company gives a vehicle to their staff to share, SARS refers to that vehicle as a “pool car” or a “pool vehicle”.
Definition of pool car as per the Oxford dictionary = A car shared by or available to several drivers.
The private use of a motor vehicle by the employee shall be deemed to have no value in terms of paragraphs 2(b) and 7 of the Seventh Schedule to the Income Tax Act if all of the following requirements are met:
- the vehicle is available to and is in fact used by employees of the employer in general;
- the private use of the vehicle by the employee concerned is infrequent or is merely incidental to its business use; and
- the vehicle is not normally kept at or near the residence of the employee concerned when not in use outside of business hours.
The following is important to note:
- When / if SARS select the company for an audit, the SARS auditor will have random interviews with the employees to ensure the “pool car” is available and used by all.
- Ensure that detailed logbooks are kept for each “pool car”. SARS will request these logbooks during a verification and / or audit.
- SARS will investigate further as soon as the so called “pool car” is driven home every night by any employee including a member or director. The mere fact that the vehicle is available to all employees during working hours is not sufficient to classify the vehicle a “pool car”.All 3 requirements mentioned above must be met.
As soon as the company vehicle is taken home by an employee on a regular basis, that employee is deemed to have the benefit of using a company vehicle for private travel. The fringe benefit is taxable.
As soon as your company / close corporation considers using “pool vehicles”, ensure that there are proper internal controls and that all the vehicles meet all three requirements as explained above.
If you have any enquiries, please contact Adri Britz at abritz@fhbc.co.za