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It has been noted that employers have increasingly been utilising rental vehicles for business purposes, as opposed to directly owning them or acquiring them via finance leases.
Where these vehicles are then provided to employees for business use, the current calculation of the fringe benefit of the private use of the vehicle is not appropriate. It has been proposed that the fringe benefit be calculated using the rental value as the starting point. This will be applicable if the vehicle is acquired under an operating lease and the operating lease was concluded by parties who are not connected persons in relation to each other, transacting at arms’ length.
For this transaction to be viewed as an operating lease, the lease agreement must contain the following elements:
- The employer must rent the vehicle from a lessor in the ordinary course of the lessor’s business (other than banking, financial services business or insurance business).
- The vehicle may be leased by the general public for a period of less than one month.
- The costs of maintaining the vehicle must be borne by the lessor.
- The risk of loss or destruction of the vehicle must not be assumed by the lessee.
The monthly value of the vehicle rental for fringe benefit purposes will be the actual costs incurred by the employer under the operating lease as well as the cost of fuel in respect of that vehicle.
Where an employee is allocated a fuel card that is not specifically allocated to that vehicle, the taxable benefit that results must be reflected separately as a travel allowance. Where the maintenance, license and insurance in respect of the vehicle have been split from the main rental agreement, the provision of those services to the employee by the employer would result in a different fringe benefit that had to be valued separately.
SARS has stated that the proposed amendments are effective in respect of years of assessment commencing on or after 1 March 2013.