- Tax experts warn South African employees that SARS treats personal use of a company vehicle as additional taxable income
- Budget 2026 fuel levy increase makes company car allowance more expensive for employees who cover their own fuel costs
- Accounting firm Nuvia auditors said it is often better for employees to buy their own cars and claim travel allowances
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South African employees who enjoy a company car as a workplace perk may want to take a closer look at what that benefit is really costing them. Tax experts are warning drivers that there is no such thing as a tax-free company car, and hidden costs could quietly eat up your take-home pay.
The South African Revenue Service considers personal use of a company vehicle as additional income. Every month, a taxable fringe benefit is added to an employee's pay slip, increasing their tax liability when paid as earnings. This results in many workers paying more in taxes than if they drove their own cars.
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How is fringe benefit calculated?
sars calculates Monthly fringe benefit as a flat percentage of the assessed value of the vehicle, which is based on the original purchase price including VAT but excluding finance charges. If the vehicle comes with a maintenance plan, the rate is 3.25% per month. Without this, it increases to 3.50%.
according to business techEven employees who perform critical functions Business Kilometers are not immediately safe. Employers are required to withhold tax on the full fringe benefit each month, and any adjustments occur only after the employee files his or her tax return and submits a detailed logbook. Accounting and tax firm Nuvia auditors warned that this leads to reduced cash flow throughout the year.
“A company car is usually not worth it. The lack of VAT recovery and the monthly fringe benefits tax make it expensive. You are better off buying the car yourself and, if applicable, using the modest travel allowance to cover business trips.”
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Source: News in Brief