Two SARS binding rulings clarify interpretation of non-taxable travel benefits

Author: Ian Hurst — Managing Director, Paymaster People Solutions

Have you ever considered when a travel benefit might be non-taxable?

It is regularly assumed that transport services provided for employees (to ferry them to and from their place of work) is an employment benefit and thus attracts fringe-benefits tax.

SARS now has two rulings that clarify how to more accurately interpret this:

Binding Private Ruling: BPR 262^[1]

Binding Private Ruling: BPR 262 (downloadable here) deals with value to be placed on the on the benefit of transporting employees to and from their place of work from a certain collection point.

Scenario: a company works unusually long hours and public transport is not always available. The company wishes to assists its employees.  The proposals are:

1. The Shuttle Service Concept – A shuttle service will connect each of the Applicant’s business units to a public transport interchange nearest to the relevant business unit. This service will be available where the nearest interchange is situated more than 500 metres walking distance from the business unit where the Employee works. The Employees will make use of public transport services to travel from their homes to this nearest transport interchange and back, but will use the shuttle service between the transport interchange and the relevant business unit. This service is intended to serve the Employees who work shifts during normal business hours.
2. The Direct Service Concept – A dedicated transport service will be provided between a specifically identified central point (collector’s point) in a residential area where an Employee resides and the business unit where the Employee works. The Employees will be required to organise their own transport from their homes to the collection points and back. This service will only be available where the nearest available public transport is situated more than 500 metres walking distance from the business unit where the Employee works. In addition, this service will only be available to Employees whose work is core to the operation of the Applicant and who works shifts that are difficult to align with existing public transport services.

In other words, the company pays the shuttle operators directly and does not charge the employees for this service.

Ruling: The binding ruling stated that no value was to be placed on the on the benefit of transporting in either of the above scenarios.

Binding General Ruling (Income Tax) 42^[2] 

Binding General Ruling (Income Tax) 42 (downloadable here) deals with employees that often receive provided transport to and from their homes.

Paragraph 2(e) provides that a taxable benefit is deemed to have been granted by an employer to an employee if any service has, at the expense of the employer, been rendered to the employee for his or her private or domestic purposes. The cash equivalent of the value of the taxable benefit is calculated under paragraph 10(1), and the no-value provisions are provided for under paragraph 10(2).

Paragraph 10(2)(b) provides that the taxable benefit will attract no value where any transport service is rendered by any employer to his employees in general for the conveyance of such employees from their homes to the place of their employment and vice versa.

The word “homes” is very specific and denotes a specific dwelling in which the employee resides or inhabits. The question that arises is whether, from an interpretive perspective, the word “homes” should be restricted to the exact position of an employee’s specific dwelling. An employee could, for example, live in a block of flats, on a farm, or in a rural area with little or no accessible roads. The employee may be required to walk to the nearest accessible road to obtain the transport service which could, for example, be kilometres away from his or her dwelling. Taking the above into consideration, an employer may arrange for employees living within a certain radius to be collected from or dropped off at a common area or central point between the employees’ homes and place of employment. An employer may also provide transport services for only part of the trip between the employees’ homes and place of employment.

Ruling: Transport services provided to employees to and from any collection or drop-off point en route to or from the employees’ homes and place of employment is accepted to fall within the provisions of paragraph 10(2)(b). No value will, therefore, be placed on these transport services.

Still have questions and uncertainties? You are invited to contact me (Ian Hurst) and I will be happy to clarify any further questions that you might have in this regard.

Sources:

[1] Source: original SARS BINDING PRIVATE RULING: BPR 262 document: http://www.sars.gov.za/AllDocs/LegalDoclib/Rulings/LAPD-IntR-R-BPR-2017-06 – BPR 262 employer provided transport service.pdf

[2] Source: original SARS BINDING GENERAL RULING (INCOME TAX) 42 document: http://www.sars.gov.za/AllDocs/LegalDoclib/Rulings/LAPD-IntR-R-BGR-2017-05 – BGR42 No value provision in respect of transport services.pdf

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