14 February 2013

Zimbabwe: Taxation of Motoring Benefits

All benefits or advantages whatsoever (except where specifically exempted), granted in lieu of or in the nature of "remuneration" are liable to Employees' Tax (Pay As You Earn) in terms of the Income Tax Act.

An example is that of a motoring benefit which an employer may offer to an employee for usage of a motor vehicle as part of the employee's conditions of employment.

The motoring benefit granted in this case constitutes remuneration and should be subjected to PAYE in terms of the Income Tax Act.

Valuation of motoring benefit

The value of motoring benefit should be determined on the basis of "cost to the employer".

The cost to the employer in this case is determined on the basis of a deemed cost which is provided for in the Finance Act.

The deemed cost basis of valuing the motoring benefit is also mandatory in the sense that the prescribed amounts are not subject to variation in relation to the running costs or the vehicle's value.

Calculations of the benefit are based on the engine capacity of the vehicle and are not subject to apportionment between business and private usage of the vehicle allocated to the employee. The benefit is, however, reduced proportionally if the employee uses the vehicle for only part of the tax year.

Deemed Values

The following are the deemed benefits for the purposes of calculating PAYE:

Engine Value deemed Value deemed

Capacity Benefit per Benefit per month year

1500cc or Less US$150 US$1 800

1501cc to 2000cc US$200 US$2 400

2001 to 3000cc US$300 US$3 600

Above 3000cc US$400 US$4 800

Inclusion of the benefit for VAT purposes

It should be noted that where the employer is registered for Value Added Tax, the motor vehicle benefit constitutes a taxable supply and should be included on the VAT 7 return for the respective period.

Reminder: VAT for January

Valued clients are kindly reminded that Value Added Tax for January 2013 is due and payable on or before 25th February 2013.

Disclaimer: This article was compiled by the Zimbabwe Revenue Authority for information purposes only. Zimra shall not accept responsibility for loss or damage arising from use of material in this article and no liability will attach to the Zimbabwe Revenue Authority.

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