Many business owners assist their employees with transport to or from work, but how they do this can have important tax implications. Even something seemingly trivial, like reimbursing a worker who catches a bus or taxi, can be treated as a taxable benefit. This will directly inflate your employees’ total cost to company while adding another layer of complexity to your tax compliance.
Fortunately, the Income Tax Act provides for “no-value transport services”. This essentially means that certain types of employee transport assistance won’t get treated as taxable benefits provided specific conditions are satisfied. A recent SARS binding ruling clarifies how this works.
The key requirement is that employers must render the transport service in order for the no-value provision to apply. In other words, simply covering the cost is not sufficient. Therefore, reimbursing employees who use public transport facilities (like a train) or private services available to the general public (e.g. Uber) would not qualify and would still be treated as a taxable benefit.
Rendering a transport service directly (e.g. using your own vehicles to ferry employees to work) will immediately trigger the no-value provision. But what if you provide transport assistance indirectly, such as contracting a transportation company to handle the logistics on your behalf? For this to qualify as a no-value transport service, three conditions must be satisfied:
1. The service must be exclusive to your employees (e.g. involve predetermined routes).
2. Your employees can’t use the service on an ad hoc basis.
3. You need to contract the service provider (i.e. your employees can’t be involved).
The takeaway from all of this is that the most convenient options for assisting your employees (e.g. reimbursing their use of public transport) will probably get treated as taxable benefits and come back to bite you during tax season. Taking advantage of the no-value transport provision will necessitate some upfront work, but that should pay off later when you avoid the taxable benefit headaches.
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