Acts Online
GT Shield

Income Tax Act, 1962 (Act 58 of 1962)

Schedules

Seventh Schedule

Benefits or Advantages Derived by reason of Employment or the Holding of any Office

7. Right of Use of Motor Vehicle

 

1)        For the purposes of this paragraph, "determined value", in relation to a motor vehicle, means-

a) where such motor vehicle (not being a vehicle in respect of which paragraph (b)(ii) of this definition applies) was acquired by the employer, the retail market value thereof as determined by the Minister by regulation (excluding any finance charge or interest payable by the employer in respect of the employer’ acquisition thereof); or

[Subparagraph (1)(a) substituted by section 75(1)(a) of Act No. 43 of 2014]

b) where such motor vehicle—
i) is held by the employer under a lease (other than an 'operating lease' as defined in section 23A(1)); or
ii) was held by the employer under a lease (other than an 'operating lease' as defined in section 23A(1)) and the ownership thereof was acquired by the employer on the termination of the lease;

the retail market value thereof at the time the employer first obtained the right of use of the vehicle or, where at such time such lease was a lease contemplated in paragraph (b) of the definition of 'instalment credit agreement' in section 1 of the Value-Added Tax Act, the cash value thereof as contemplated in the definition of 'cash value' in the said section; or

c) in any other case, the retail market value, as determined by the Minister by regulation, of such motor vehicle at the time when the employer first obtained the vehicle or the right of use thereof or manufactured the vehicle:

[Subparagraph (1)(c) substituted by section 75(1)(a) of Act No. 43 of 2014]

Provided that

a) where an employee has been granted the right of use of such motor vehicle as contemplated in subparagraph (2) (other than a motor vehicle acquired under an operating lease as defined in section 23A(1)) and such vehicle, or the right of use thereof, was acquired by the employer not less than 12 months before the date on which the employee was granted such right of use, there shall be deducted from the amount determined under the foregoing provisions of this subparagraph a depreciation allowance calculated according to the reducing balance method at the rate of 15 per cent for each completed period of 12 months from the date on which the employer first obtained such vehicle or the right of use thereof to the date on which the said employee was first granted the right of use thereof; and
b) where such motor vehicle was acquired by the employer from an associated institution in relation to the employer and the employee concerned had, prior to such acquisition, enjoyed the right of use of such motor vehicle, the determined value shall be the determined value as at the date on which the employee was granted the right of use of such motor vehicle for the first time.

 

1A)        [Deleted]

 

2) Where an employee has been granted the right to use any motor vehicle as contemplated in paragraph 2 (b), the cash equivalent of the value of the taxable benefit shall be so much of the value of the private use of such vehicle (as determined under this paragraph in respect of the period of use) as exceeds any consideration given by the employee to the employer for the use of such vehicle during such period, other than consideration in respect of the cost of the licence, insurance, maintenance or fuel in respect of such vehicle.

 

3)

a) Where an employer's rights and obligations under a lease in respect of a motor vehicle are transferred to his employee the employer shall for the purposes of this Schedule be deemed to have granted the employee the right to use such vehicle for the remainder of the period of the lease.
b) In such case—
i) any rentals becoming payable by the employee under the lease shall be deemed to be a consideration payable by him for the said right; and
ii) the determined value of the vehicle shall be deemed to be an amount determined in accordance with the provisions of subparagraph(1)(b);

 

4) Subject to subparagraph (10), the value to be placed on the private use of such vehicle shall be determined for each month or part of a month during which the employee was entitled to use the vehicle for private purposes (including travelling between the employee's place of residence and his or her place of employment or any other travelling done for his or her private or domestic purposes) and the said value shall—

[Words preceding paragraph (a) amended by section 67 of the Taxation Laws Amendment Act, 2016 (Act No. 15 of 2016]

a)        as respects each such month-

i) be an amount equal to 3,5 per cent of the determined value of such motor vehicle: Provided that where the motor vehicle is the subject of a maintenance plan at the time the employer acquired the motor vehicle or the right of use thereof, that amount shall be reduced to an amount equal to 3,25 per cent of the determined value of the motor vehicle; or
ii) where such vehicle is acquired by the employer under an 'operating lease' as defined in section 23A(1) concluded by parties transacting at arm's length and that are not connected persons in relation to each other, be-
aa) the actual cost to the employer incurred under that operating lease; and
bb) the cost of fuel in respect of that vehicle; and
b) as respects any such part of a month, be an amount which bears to the appropriate amount determined in accordance with item (a)(i) or (ii) for a month the same ratio as the number of days in such part of a month bears to the number of days in the month in which such part falls.

 

5) No reduction in the value determined under subparagraph (4) shall be made for the purposes of item (b) of that subparagraph by reason of the fact that the vehicle in question was during any period for any reason temporarily not used by the employee for private purposes.

 

6) Where more than one motor vehicle is made available by an employer to a particular employee at the same time and each such vehicle was used by the employee during the year of assessment primarily for business purposes, the value to be placed on the private use of all the said vehicles shall be deemed to be the value of the private use of the vehicle having the highest value of private use or such other vehicle as the Commissioner may decide, on application by the taxpayer: Provided that the preceding provisions of this subparagraph shall not apply where the provisions of subparagraph (7) or (8) are applied.

[Subparagraph (6) amended by section 96 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

7) Where accurate records of distances travelled for business purposes in such vehicle are kept, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of the vehicle, calculated under subparagraph (4), must be reduced by an amount that bears to that calculated value the same ratio as the number of kilometres travelled for business purposes bears to the total amount of kilometres travelled in such vehicle during that year of assessment.

[Subparagraph (7) amended by section 96 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

8) Where accurate records of distances travelled for private purposes in such vehicle (other than a vehicle acquired as contemplated in subparagraph (4)(a)(ii)) are kept and the employee bears—
(a)
i) the full cost of the licence for such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the licence for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment;
ii) the full cost of the insurance of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the insurance for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment; or
iii) the full cost of the maintenance of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment the value placed on the private use of such vehicle calculated under subparagraph (4) must be reduced by an amount that bears to the amount of the cost of the maintenance for such vehicle the same ratio as the number of kilometres travelled for private purposes bears to the total number of kilometres travelled in such vehicle during that year of assessment;
b) the full cost of fuel for private use of such vehicle, upon the assessment of the employee’s liability for normal tax for the year of assessment reduce the value placed on the private use of the vehicle during that year of assessment calculated under subparagraph (4) must be reduced by an amount determined for the total kilometres travelled for private purposes by applying the rate per kilometre for fuel fixed by the Minister in the Gazette for the purposes of section 8(1)(b)(ii) and (iii).

[Subparagraph (8) amended by section 96 of the Taxation Laws Amendment Act, 2015 (Act No. 25 of 2015]

 

8A) For the purposes of subparagraphs (7) and (8), if the employee contemplated in those subparagraphs is a ‘judge’ or a ‘Constitutional Court judge’ as defined in section 1 of the Judges’ Remuneration and Conditions of Employment Act, 2001 (Act No. 47 of 2001), the kilometres travelled between the judge’s place of residence and the court over which the judge presides must be deemed to be kilometres travelled for business purposes and not for private purposes.

 

9) [This subparagraph deleted by the Taxation Laws Amendment Act, No. 7 of 2010].

 

10) For the purposes of this paragraph the private use by an employee of a motor vehicle shall be deemed to have no value, if—

a)

i) the vehicle is available to and is in fact used by employees of the employer in general;
ii) the private use of the vehicle by the employee concerned is infrequent or is merely incidental to its business use; and
iii) the vehicle is not normally kept at or near the residence of the employee concerned when not in use outside of business hours; or
b) the nature of the employee's duties are such that he or she is regularly required to use the vehicle for the performance of those duties outside his or her normal hours of work, and he or she is not permitted to use that vehicle for private purposes other than
i) travelling between his place or her of residence and his or her place of work; or
ii) private use which is infrequent or is merely incidental to its business use.

 

11) For the purposes of this paragraph, ‘maintenance plan’, in relation to a motor vehicle, means a contractual obligation undertaken by a provider in the ordinary course of trade with the general public to underwrite the costs of all maintenance of that motor vehicle, other than the costs related to top-up fluids, tyres or abuse of the motor vehicle, for at least a period of not less than three years and a distance travelled by the motor vehicle of not less than 60 000 kilometres from the date that the provider undertakes the contractual obligation: Provided that the contractual obligation may terminate at the earlier of—

a)        the end of the period of three years; or

b)        the date on which the distance of 60 000 kilometres is travelled by that motor vehicle.