SARS clarifies rules on employee transport
SARS has offered clarity for companies that offer transport services to their employees. While the Income Tax Act stipulates that any service paid for by an employer for the private or domestic use of an employee is deemed a taxable benefit, SARS, recognising the necessity of companies’ providing transport for their employees, made provision for this to attract ‘no value’ for tax.
However, says a Business Day report, the provision gave rise to confusion, particularly in cases where employers did not provide the transport service directly but contracted a third party to do so.
Now, after years of uncertainty, the revenue service has issued a binding general ruling that clarifies the tax law relating to this fringe benefit. Under the new rule the no-value provision applies if the transport service is outsourced to a specific transport service provider and meets certain conditions.
Among these is that the service is provided exclusively to employees along predetermined routes; employees are not allowed to request the service on an ad hoc basis; and the contract for transport is between the employer and the transport service provider.
Employees may not be party to the contract.
‘The dilemma, especially in cities, is that employees live far from each other and far from work,’ said Jaco la Grange, chair of the SA Institute of Tax Professionals’ personal tax committee.
‘The practice has been to transport employees from the office to a specific drop-off area such as a bus depot or a taxi rank.’
Webber Wentzel associate director Wesley Grimm welcomed the latest clarification, saying: ‘It provides scope for additional employment opportunities within organisations as well as a market for niche transport businesses.’
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