Page 619 - SAIT Compendium 2016 Volume2

IN 72 Income Tax acT: InTeRPReTaTIon noTes IN 72
Example 1 – Value of private use if maintenance plan is included
Facts:
Employer XYZ grants the right of use of a motor vehicle to its employee from 1 March 2012. The employer purchased the motor vehicle for R250 000 (including VAT). XYZ was not entitled to an input tax claim for the VAT. The motor vehicle comes standard with a maintenance plan at no extra charge. The employee pays R500 per month for the use of the motor vehicle.
Result:
The ‘determined value’ of the motor vehicle is R250 000.
The monthly value of private use is R250 000 × 3,25%
Less: Consideration paid by employee for bene t
Cash equivalent of the value of the taxable bene t per month:
R
8 125 (500)
7 625
The rate does not increase to 3,5% once the maintenance plan expires, but remains at 3,25%.5
4.3.2 Per month
The value to be placed on the private use of a motor vehicle is determined for each month or part of a month during which an employee was entitled to use the motor vehicle for private purposes. A ‘month’ is de ned in paragraph 1 as any of the 12 portions into which any calendar year is divided.
An employee, who only had the use of a motor vehicle for part of a month, must apportion the private value according to the number of days that the employee had the use of the motor vehicle. For example, if an employee is rst granted the right to use a motor vehicle in the middle of a month (for example, 15 June), the value of private use must be based on the total number of days that the employee had the right to use that motor vehicle. In other words, 15 days in June divided by the total number of days in that month, that is, 30 days.
The value of private use of the motor vehicle may not be reduced if, for whatever reason, the employee does not temporarily use the motor vehicle for private purposes.
Example 2 – Temporarily not used for private purposes
Facts:
Employee Z has the use of a company car. During the 2013 tax year, Z had a serious car accident and did not drive the motor vehicle for three months while it was being repaired and while Z was recovering from injuries. During the three-month period the motor vehicle was parked in the of ce garage for part of the time and at Z’s house for part of the time.
Result:
The three-month period represents a period when Z temporarily did not use the motor vehicle for private purposes. The value of private use for those months may not be reduced to take account of the period when Z did not use the motor vehicle.
Example 3 – Temporarily not used for private purposes
Facts:
Employee Z, who lives and works in Johannesburg, has the use of a company car. Z goes to Kenya for two months and had to return the company car to the employer for use by other employees during the two-month absence.
Result:
During the two-month period, Z did not have the right of use of the motor vehicle because the bene t was given to other employees. The fringe bene t ceases for the period Z is away.
4.3.3 Determined value
‘Determined value’ in relation to a motor vehicle means –
• the original cost to the employer (excluding any nance charge or interest payable) if the motor vehicle was acquired
under a bona de agreement of sale or exchange concluded between parties acting at arm’s length;
• the ‘cash value’* of the motor vehicle if the motor vehicle is or was held under a lease contemplated in paragraph (b)
of the de nition of ‘instalment credit agreement’;†
• the retail market value of the motor vehicle (at the time the employer rst obtained the right to use the motor vehicle) if
the motor vehicle was held or held and then acquired by the employer under any other lease (other than an “operating lease”); or
* See Annexure C for the required de nition from the Value-Added Tax Act. The residual value under a lease agreement has no bearing on the determined value and must be ignored.
† See Annexure C for the required de nition from the Value-Added Tax Act. The residual value under a lease agreement has no bearing on the determined value and must be ignored.
saIT comPendIum oF Tax LegIsLaTIon VoLume 2 611