Retail Market Value of Right of Use of Motor Vehicle

sarsOn 28 April 2015, National Treasury published the Regulations dealing with the determination of the ‘retail market value’ of the right of use of a motor vehicle fringe benefit.

A taxable fringe benefit arises where an employee is granted the right to use a motor vehicle, owned by his employer, for private use. Travelling between the employee’s residence and place of work is included in private use. The ‘determined value’ of a motor vehicle is ordinarily used to calculate the value of the private use.

The retail market value must be used to determine the fringe benefit for vehicles acquired by an employer on or after 1 March 2015. Where the employer did not acquire the vehicle, for example, if the employer is a vehicle manufacturer, the Regulations apply to vehicles manufactured on or after 1 March 2015. If the employer holds the vehicle under a lease, the Regulations apply where the right of use was obtained by the employer on or after 1 March 2015. The Regulations do not apply to vehicles where the use had already been granted prior to 1 March 2015.

Prior to the amendments, the cost of the vehicle to the employer or the ‘market value’ was used to determine the benefit in a number of cases. This discriminated in favour of employees of motor vehicle manufacturers when compared to other employees. The ‘retail market value’ stipulated by the Regulations must now be used in all cases.

In terms of the Regulations, the retail market value of motor vehicles manufactured, obtained or acquired or the right of use of any motor vehicle obtained by the employer is determined as follows:

Motor vehicle manufacturers or importers
New or demonstration motor vehicles
Pre-owned motor vehicles
Motor vehicle dealers or rental companies
New or demonstration motor vehicles
Pre-owned motor vehicles
Cases other than motor vehicle manufacturers, importers, dealers or rental companies
Years of Assessment starting on or after 1 March
2015(pre 1 March 2016) 2016 pre 1 March 2017) 2017 (pre 1 March 2018) 2018
Dealer billing price (excl. VAT) less 10% Dealer billing price (excl. VAT) less 5% Dealer billing price (excl. VAT) Dealer billing price (incl. VAT)
Cost to employer to acquire motor vehicle (excl. finance charge, interest or VAT payable by employer in respect of the employer’s acquisition), or where the motor vehicle is acquired at no cost to employer, the market value and costs of repairs incurred to grant employee the right of use Cost to employer to acquire motor vehicle (excl. finance charge or interest payable by the employer in respect of employer’s acquisition), or where the motor vehicle is acquired at no cost to the
employer, the market value thereof, and costs of repairs incurred to grant employee the right of use (incl. VAT); and
Dealer billing price (excl. VAT) An amount equal to dealer billing price (including VAT)
Cost to employer to acquire motor vehicle (excl. finance charge, interest or VAT payable by employer in respect of the employer’s acquisition), or where the motor vehicle is acquired at no cost to the employer, the market value thereof, and costs of repairs incurred for to grant an employee the right of use Cost to employer to acquire motor vehicle (excl. any finance charge or interest payable by the employer in respect of the employer’s acquisition), or where motor vehicle is acquired at no cost to employer, the market value and costs of repairs incurred to grant an employee the right of use (incl. VAT)
Price of acquisition of motor vehicle paid by employer (incl. VAT)

In terms of the Regulations, ‘dealer billing price’ means ‘the recommended selling price of a motor vehicle as determined by the manufacturer thereof in the Republic or importer thereof in respect of the selling of motor vehicles to motor vehicle dealers and motor vehicle rental companies’.

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