It’s time to submit tax returns. Company car recipients, who have been feeling “down” recently because of the amendments proposed in relation to the taxation of company cars, should lift their heads up and smile. They could potentially qualify for a tax refund for the 2010 tax year (that’s right!)
Fringe benefits tax is payable on a monthly basis in relation to individuals who have the use of company cars. The current rate of tax is 2.5% of the determined value of the vehicle excluding VAT on a monthly basis. Employers disclose 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 (incl travel bet home and work) travelled by the individual would be 10 000km.
Taxpayers who have travelled less than 10 000 private kilometres can claim a deduction in their income tax returns provided that they have kept a logbook.
Here’s how to do it:
Assuming that the company car recipient has travelled 8 000 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. The calculation of the deduction will be as follows:
Private km travelled: 8 000
Private km taxed already: 10 000
Fringe benefit per IRP5 certificate: R60 000
Ratio of taxes to be claimed back as a deduction: 2 000/10 000 X 60 000
Deduction to be claimed: 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.
On a final note, remember that you must have a logbook and you need to retain this for a period of 5 years, just in case SARS requests it!
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