HomeAbout Us Accounting ServicesTax Services FREE Tax AdviceContact Us
Dont forget to read our other FREE Tax Advices and Tips

The pros and cons of a company car



What is a company car?

• The Vehicle that is owned by your Company/CC/Employer and granted to the employees for business and private use
o The vehicle is registered in the name of the employer
o A CC is a separate legal person from its member/s therefore if the vehicle is registered in the name of the CC, that vehicle is a company car for tax purpose. o The CC is the employer and the member/s is the employees

How does someone qualify for a company car?

• The employer decide whether to grand an employee a company vehicle
o Senior position at the company
o Part of employment package

What are the advantages of a company car

• You get the vehicle free of charge
• Your employer pay for fuel
• Your employer pay for maintenance

What are the tax implications of a company car for the employee

• A monthly fringe benefit of 2,5% of the vehicle’s value (excluding VAT and interest) is added to your salary
• If given the use of more than 1 vehicle, the fringe benefit included in your income will be
   o 2,5% on vehicle with the highest value
   o 4% on other vehicle or remaining vehicles 

Example
              -  You earn a salary of R 30,000 pm and get to use a company car of R 114,000 (VAT inclusive) as part of your employment terms. The company is generous and also grant you another car valued at R 50,000 (VAT exclusive) 
               - Your monthly pay-slip will look as follows:
                  • Salary R 30,000 
                  • Company car 1 (2,5% x R 100,000) R 2,500
                   • Company car 2 (4% x R 50,000) R 2,000
                   Gross salary R 34,500


Is it possible to receive a company car and a travel allowance?
• Yes
• Provided:
   o The travel allowance is not i.r.o the vehicle the employee received from the company. In other words its must be the employee’s own vehicle 
   o If the employee also receive a company car, the fringe benefit that for the company car is calculated at using 4% and not the 2,5% 

Example:
      - Employee earns a salary of R 30,000 pm 
      - Employee receive a travel allowance of R 2,000 pm 
      - Employee also make use of a company car valued at R 100,000 (Ex VAT) 
      -  Your monthly pay-slip will look as follows:
            • Salary R 30,000
            • Company car (4% x R 100,000) R 4,000
            • Travel allowance R 2,000
             Gross salary R 36,000



What if the employee pays for the fuel and maintenance of the vehicle?
• If the employee pays for fuel and maintenance cost, the monthly fringe benefit value of 2,5% must be reduced by:
      o 0.22c for fuel
      o 0.18c for maintenance 

Example: 
            - Vehicle cost R 100,000 (Ex VAT) 
            - Fringe benefit R 2,500 
            - Less: Fuel (0.22c x R 100,000) R 220 
            - Less: Maintenance (0.18 x R 100,000) R 180 Company car R 2,100



What are the tax implications for an employee who uses a company vehicle but other employees also use it
• This type of vehicle would be classified as a Pool vehicle.
• Pool vehicles have no tax implication on employees as all the staff uses it
• Tax advisory point:
     o Keep a register that records the use of the vehicle.