The South African Revenue Service (SARS) introduced some changes with effect from 1 March 2018 to how travel claims are taxed. Travel claims that exceed the prescribed rate (R 3.61/km) are now subject to monthly Employees Tax. Previously, travel claims were taxed on assessment.
Example 1:
If an employee claims R3.61/km for 1 000 kilometers traveled for business purposes, the total claim amount receivable is R3 610. No Employees Tax is applicable, as the prescribed SARS rate was used.
Example 2:
An employee claims R5/km for 1 000 kilometers traveled. The difference between the prescribed SARS rate and the rate claimed is taxable (i.e. R 5.00 – R 3.61 = R 1.39). This means that R1 390 will reflect on the employee’s payslip and Employees tax will be levied at the employee’s marginal tax rate.
Where a travel allowance is paid in addition to a reimbursive allowance (see discussion below) or vice versa, both the amounts will be combined on assessment by SARS. These combined allowances will be treated as a taxable travel allowance.
The employee should claim a travel deduction on his/her personal income tax return.
A reimbursive travel allowance is where an allowance or advance is based on the actual distance traveled for business purposes (that is excluding private use).
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Where an employee, his/her spouse or child owns or leases a motor vehicle (whether directly or indirectly by virtue of an interest in a company, trust or otherwise) and such vehicle is let to the employer or associated institution in relation to the employer, the sum of the rental paid by the employer together with any expenditure in respect of the vehicle which was borne by the employer, is deemed to be a travel allowance. This deemed travel allowance must be declared as such and the employee will be entitled to claim expenses incurred for business travel as a deduction on assessment.
Note:
The rental received by the employee must not be declared as rental income but as a travel allowance. Although the employee obtains the right of use of the vehicle from his/her employer, he/she is not subject to tax on the benefit arising from the private use of such motor vehicle.
Here below some more in-depth details of the changes that has taken effect from March 2018:
Where the reimbursive allowance does not exceed the prescribed rate per kilometer AND no other compensation is paid to the employee, the amount is not subject to employees’ tax but the full amount must be reflected on the IRP5 certificate under code 3703.
Where the reimbursive allowance does not exceed the prescribed rate per kilometer however other compensation is paid to the employee (travel allowance code 3701), the amount is not subject to employees’ tax but the full amount must be reflected on the IRP5 certificate under code 3702.
Where the reimbursive allowance exceeds the prescribed rate per kilometer (irrespective of the kilometers traveled),the full amount above the prescribed rate is subject to employees’ tax.
Example 1:
Where the reimbursive allowance exceeds the prescribed rate per kilometer (irrespective of the kilometers traveled) and other compensation was paid (travel allowance), the full amount above the prescribed rate is subject to employees’ tax.
Example 2:
NOTE: On assessment of the individual’s (employee’s) personal income tax return, SARS will combine the codes 3701 + 3702 + 3722 and the employee can be entitled to claim expenses incurred for business travel as a deduction on assessment against all values (R3610 + R1000 + R5000 = R9610).
The table hereunder displays the relevant source codes under which the amounts must be reflected on the IRP5/IT3(a) certificate from 1 March 2018.
We can assist in setting up and structuring the correct SARS codes into your Payroll. Feel free to contact us or visit our website.
Or visit SARS website if you Dare!!!
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