Company Car Fringe Benefit Tax in South Africa
When your employer gives you use of a company vehicle, SARS treats the private use as a taxable fringe benefit under paragraph 7 of the Seventh Schedule to the Income Tax Act 58 of 1962. The monthly cash equivalent is 3.5% of the vehicle’s determined value — or 3.25% where the vehicle was acquired subject to a maintenance plan. On a R450,000 double cab with a maintenance plan, that is R14,625 a month added to your taxable income; without the plan, R15,750. Note the plan must have formed part of the original purchase: a top-up or add-on plan taken out afterwards does not qualify for the lower rate.
Determined value means, broadly, the cost of the vehicle to the employer including VAT but excluding finance charges and interest. Where the employer acquired the vehicle at least 12 months before granting you use, the determined value is reduced by 15% for each completed year on a reducing-balance basis — so a car bought three years before you received it is valued at roughly 61% of original cost. For PAYE, your employer does not tax the full benefit each month: 80% of the cash equivalent is included in remuneration, dropping to 20% where the employer is satisfied that at least 80% of use will be business travel. That is a withholding convention, not the final answer — the actual split is settled when you file your ITR12.
The assessment stage is where a logbook earns its keep. SARS reduces the annual benefit in the ratio of business kilometres to total kilometres, and grants further reductions where you personally bore the full cost of the licence, insurance, maintenance or fuel for private use. Drive 20,000 of 30,000 kilometres for business with a proper logbook and two-thirds of the benefit falls away, often producing a healthy refund against the 80% withheld through the year. No logbook, no reduction — the full benefit stands.
This calculator uses the 2026/2027 tax tables to show the extra PAYE the benefit actually costs you each month, computed as the difference between PAYE on your salary with and without the 80% inclusion. If you are weighing a company car against a travel allowance, run both numbers: the allowance usually wins for high, provable business mileage in your own vehicle, while the company car wins when the employer carries all running costs and your business mileage is low.
Frequently Asked Questions
How is a company car taxed in South Africa?
Private use of an employer-provided vehicle is a taxable fringe benefit under paragraph 7 of the Seventh Schedule to the Income Tax Act 58 of 1962. The monthly value is 3.5% of the vehicle’s determined value, reduced to 3.25% if the car was bought subject to a maintenance plan. Your employer adds 80% of that value to your monthly remuneration and deducts PAYE on it.
What is the “determined value” of a company car?
Broadly, the cost of the vehicle to the employer including VAT but excluding finance charges and interest. For a R450,000 vehicle with a maintenance plan, the monthly fringe benefit is R14,625 (3.25%); without a plan it is R15,750 (3.5%). The determined value is reduced by 15% per completed year for vehicles the employer acquired at least 12 months before granting the employee use.
Why is only 80% of the fringe benefit taxed on my payslip?
For monthly PAYE purposes the employer includes 80% of the cash equivalent in remuneration, on the assumption of meaningful private use. If the employer is satisfied that at least 80% of the vehicle’s use will be for business, the inclusion drops to 20%. The remaining reconciliation happens on assessment when you file your ITR12 — a full logbook can reduce the final taxable amount for actual business kilometres.
Can I reduce company car tax with a logbook?
Yes. On assessment, the fringe benefit is reduced in the ratio of business kilometres to total kilometres travelled, provided you kept an accurate logbook. Further reductions apply where you personally bore the full cost of licence, insurance, maintenance or private fuel. Without a logbook, no reduction is allowed — the full benefit stands.
Is a company car or a travel allowance better?
It depends on business mileage. A travel allowance (80% included in PAYE) suits employees who drive substantial, provable business kilometres and own their vehicle — they claim costs against the allowance at assessment. A company car suits low-business-mileage employees because the employer carries depreciation, insurance and maintenance, but the fixed 3.5%/3.25% benefit taxes you even in months you barely drive.
Does the company car benefit affect UIF and other deductions?
The taxable portion forms part of remuneration, so it feeds into PAYE and, in principle, UIF — though most company car recipients already earn above the R17,712 monthly UIF ceiling, so UIF rarely changes. It also increases remuneration for SDL purposes at 1% for the employer.
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