Page 617 - SAIT Compendium 2016 Volume2

IN 71 Income Tax acT: InTeRPReTaTIon noTes IN 72
(b) any asset is given by an employer to an employee for long service, such value to be placed thereon shall be reduced by the lesser of the cost to the employer of all such assets so given to the employee during the year of assessment and R5 000.
(3) No value shall be placed under this paragraph on fuel or lubricants supplied by an employer to his employee for use in a motor vehicle where the value of the private use of such vehicle has been determined under paragraph 7.
(4) For the purposes of this paragraph, ‘long service’ means an initial unbroken period of service of not less than 15 years or any subsequent unbroken period of service of not less than 10 years.
INTERPRETATION NOTE: NO. 72
DATE: ACT: SECTION: SUBJECT:
Preamble
22 March 2013
INCOME TAX ACT 58 OF 1962 (the Act) Paragraph 7 of the Seventh Schedule to the Act Right of use of Motor Vehicle
CONTENTS
1. Purpose
2. Background
3. The law
4. Application of the law
4.1 Taxable
4.2 Value of the taxable
4.2.1 Value of private use
4.3 Fixed percentage per month x determined value
4.3.1 Fixed percentage
4.3.2 Per month
4.3.3 Determined value
4.4 Vehicle held under an operating lease
4.5 Reduction of the value of private use on
4.5.1 Right of use of more than one motor vehicle for private purposes
4.5.2 Reduction for business
4.5.3 Reduction when the employee incurs expenditure in relation to the motor vehicle
4.6 Circumstances under which the value of private use is deemed to be nil
4.6.1 Available for use by employees in
4.6.2 Nature of employee duties
4.7 Consideration
4.8 Employees’ tax
4.9 Sundry provisions
4.9.1 Transfer of employer’s rights and obligations under a lease
4.9.2 Motor vehicle rented to the employer by the employee, his or her spouse or child – section 8 (1) (b) (iv)
4.9.3 Company car and travelling allowance in respect of the same motor vehicle
4.9.4 Acquisition of an asset – paragraph 2 (a) and 5 (2)
5. Conclusion
Annexure A – The law
Annexure B – Extract of income tax regulation: Fixing of rate per kilometre in respect of motor vehicles for the purposes of section 8 (1) (b) (ii) and (iii) with effect from 1 March 2012
Annexure C – Extract from the Value-Added Tax Act No. 89 of 1991
Preamble
In this Note unless the context indicates otherwise –
• ‘employee’ includes the holder of any of ce; and
• ‘paragraph’ means a paragraph of the Seventh Schedule to the Act; • ‘section’ means a section of the Act;
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note provides guidance on the income tax consequences that arise for an employee when an employer (or an associated institution in relation to an employer) grants that employee the right of use of a motor vehicle, commonly known as a ‘company car fringe bene t’, with speci c reference to the latest legislative amendments to the Fourth and Seventh Schedules to the Act.
2. Background
Employers often grant employees a travelling allowance or the use of an employer-provided motor vehicle (or both) by virtue of the employees’ employment, as a reward for services rendered by the employees or due to the employees’ duties. The right of use of a motor vehicle provided by an employer to an employee for private or domestic purposes is
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