Page 628 - SAIT Compendium 2016 Volume2

IN 72 Income Tax acT: InTeRPReTaTIon noTes IN 72
The method set out above is not the only method that an employer can use to assess whether an employee will travel more than 80% for business purposes. There may be other acceptable methods that an employer can use to satisfy itself of the 80% requirement based on the particular employee’s circumstances. SARS will, if applicable, consider whether other methods applied by an employee demonstrate that the employer did in fact properly apply its mind to the particular case. For example, with new employees or employees who change job positions, a prior year logbook may not necessarily be appropriate.
If employees’ tax has been withheld on 20% of the cash equivalent of the value of the taxable bene t and the circumstances change such that the employer realises that the employee will no longer use the vehicle more than 80% for business purposes, the inclusion rate must be adjusted to 80% immediately in the month that the circumstances change. The inclusion rate need only be adjusted from the month during which the employer reasonably became aware of the change in the employee’s circumstances and not for the entire year of assessment.
Paragraph 2 (2) of the Fourth Schedule provides that an employer may, at the written request of any employee, deduct or withhold additional amounts of employees’ tax from an employee’s remuneration. This is relevant for employees who are concerned that they will not be able to claim a suf cient reduction for business use discussed in 4.5.2 or as a result of incurring the expenses discussed in 4.5.3 with the result that they may be burdened with an unexpected tax cash ow on assessment. Employees in this situation may request that the employer include 100% (or any percentage above 80%) of the cash equivalent of the value of the taxable bene t in their remuneration as opposed to the 80% required by legislation. Employees must submit the request in writing to the employer before the employer implements the increased employees’ tax withholding.
4.9 Sundry provisions
4.9.1 Transfer of employer’s rights and obligations under a lease
An employer is deemed to have granted an employee the right to use a motor vehicle if the employer leased a motor vehicle and subsequently transferred its rights and obligations under that lease to the employee. The deemed right of use arises on the date the rights and obligations were transferred to the employee and continues for the remainder of the period of the lease. The cash equivalent of the value of the taxable bene t is calculated as discussed above, however, it is noted that –
• any rentals becoming payable by the employee under the lease shall be deemed to be consideration payable by that
employee for the said right, for example, if the value of private use of the motor vehicle amounts to R2 500 and the employee pays a monthly rental (under the lease) of R1 900, the value of private use to be included in the employee’s income will be R600 per month (R2 500 less R1 900);
• the determined value of the motor vehicle shall be deemed to be the retail market value at the time the employer rst obtained the right of use of the motor vehicle under a nance lease or the ‘cash value’ thereof under a lease contemplated in paragraph (b) of the de nition of an ‘instalment credit agreement’ (see 4.3.3); and
• if the employee acquires the motor vehicle at the end of the lease the employee may have received an additional taxable bene t (see 4.9.4).
4.9.2 Motor vehicle rented to the employer by the employee, his or her spouse or child – section 8 (1) (b) (iv) In circumstances when –
• a motor vehicle which is owned or leased by an employee, his or her spouse or his or her child (whether directly
or indirectly by virtue of an interest in a company, trust or otherwise) has been let to the employer or an associated
institution; and
• the employer then grants the right of use of that motor vehicle back to the employee concerned,
• the sum of the rental paid by the employer, plus any expenditure on the motor vehicle borne by the employer, will be
deemed to be a travelling allowance in the hands of the employee. In such a case –
• the deemed travelling allowance less the deductions permitted under section 8 (1) must be included in the employee’s
taxable income;
• the travel allowance is ‘remuneration’ in the hands of the employee and must be included in the monthly employees’
tax calculations;
• no deductions may be claimed against the rental income under the general deduction formula; and
• the motor vehicle is not treated as a company car in the employee’s hands.
4.9.3 Company car and travelling allowance in respect of the same motor vehicle
Generally, an employee who is granted a travelling allowance may claim a deduction for the portion of the allowance expended during the year of assessment for business purposes. The amount of the deduction is determined using actual costs or a deemed rate per kilometre.
A deduction is not, however, available when an employee is granted the right of use of the employer’s motor vehicle and a travelling allowance in respect of the same motor vehicle. In this situation the employee is not permitted to claim any deduction for business travel against the travel allowance. Any adjustments to taxable income must be made to the cash equivalent of the value of the taxable bene t of the company car under the business use reductions set out in 4.5.2.
The treatment of allowances and the allowable deductions are discussed in detail in Interpretation Note No. 14 (Issue 3) (20 March 2013).
4.9.4 Acquisition of an asset – paragraph 2 (a) and 5 (2)
In some circumstances, employers allow employees to acquire a motor vehicle that they previously had the right to use. Generally, should the disposal to the employee occur for no consideration or for consideration that is less than the market value of the motor vehicle, a taxable bene t will arise under paragraphs 2 (a) and 5 (2). Paragraph 2 (a) applies when an employee acquires an asset from the employer, an associated institution or any person by arrangement with the employer.
The taxable bene t is equal to the value of the motor vehicle less any consideration paid by the employee. The value of the motor vehicle is equal to market value at the time it was acquired by the employee or if it was speci cally acquired
620 saIT comPendIum oF Tax LegIsLaTIon VoLume 2