A company car could mean a tax refund

2010-08-18 Source:-http://www.timeslive.co.za/business/article609054.ece/A-company-car-could-mean-a-tax-refund

In a statement on Wednesday, consultants Ernst & Young said fringe benefits tax was payable on a monthly basis in relation to individuals who had the use of company cars.

The current rate of tax was 2.5 percent of the determined value of the vehicle excluding VAT on a monthly basis.

Employers disclosed this fringe benefit under code 3802 'Use of a motor vehicle' on the employee's IRP5 certificate.

"This fringe benefit is calculated based on the assumption that the private kilometres (including travel between home and work) travelled by the individual would be 10,000 kilometres," Vedika Andhee, Director for Tax said.

Taxpayers who had travelled less than 10,000 private kilometres could claim a deduction in their income tax returns provided that they had kept a logbook.

"Assuming that the company car recipient has travelled 8000 private kilometres during the year and her IRP5 certificate showed that the fringe benefit on the 'Use of motor vehicle' was R60,000, she could claim a deduction of R12,000 in her tax return," Andhee said.

The calculation of the deduction would take into account the private kilometres travelled (8,000), the private kilometres taxed already (10,000), the fringe benefit per IRP5 certificate (R60,000), and the ratio of taxes to be claimed back as a deduction (2000 divided by 10,000 multiplied by 60,000) which brought the deduction to be claimed to R12,000.

"Once the individual has calculated the deduction, it would need to be disclosed in the 2010 income under 'other deductions' in the tax return."

Andhee said individuals must have logbooks and these needed to be kept for a period of five years, "just in case SA Revenue Services requests them."
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read more