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Fringe Benefits

Posted 23 June 2015 under Tax Questions



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Craig says:
4 June 2015 at 18:13

Hi
Question: Fringe benefit calculation query on the use of motor car. If a car has a maintenance plan per the definition in the 7th schedule but the plan is an optional extra do you include it in the determined value when calculating the taxable fringe benefit post March 2011?

Prior to March 2011 would you of included an optional maintenance plan in the determined value of a motor car?

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TaxTimTaxTim says:
5 June 2015 at 8:14

Did you still take out the plan as part of the package or what do you mean by optional extra?


Craig says:
5 June 2015 at 8:28

Yeah, the maintenance plan was taken out but was an optional add on when the vehicle was purchased.
For example
Cash Price of the vehicle ex VAT 100 000
Optional Maintenance Plan 5yr/100000km ex VAT 25000
VAT 17500
Total R142500


TaxTimTaxTim says:
5 June 2015 at 9:41

The overall cost of the Vehicle is R142 500 and will then be subject to 3.25% when working out the tax cash value. Prior to 2011 you would not have received an benefit to the 2.5% used to calculate this tax cash value which is known as the Determined Value.


Craig says:
5 June 2015 at 10:16

Thank you for the feedback Just to clarify and I have added some more detail Lets assume the vehicle was purchased in Apr 2010 and the motor car has only been used by one employee. . So prior to Mar 2011 would the determined value have excluded the maintenance plan and VAT and the fringe benefit calculated at 2.5% of 100000 being 2500 per month. Post 1 March 2011 Would the determined value have been recalculated to include the maintenance plan and VAT with the change in rules amounting to 142500 and the fringe benefit calculated at 3.25% per month of R142500 ?


TaxTimTaxTim says:
5 June 2015 at 10:26

The cost of the car when you paid for it would have been the total less VAT and so the 2.5% would have been used on that (including the maintenance plan) where as now it would be 3.25%.

The total cost is used because the employer paid and provided for the maintenance plan which means the employee didn't and therefore benefited from this.


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