Taxation of motoring benefits

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, is liable to Pay As You Earn (PAYE). The motoring benefit granted in this case constitutes remuneration and should be subjected to PAYE in terms of the Income Tax Act {Chapter 23:06].

Valuation of motoring benefit

The value of motoring benefit should be determined based on “cost to the employer”. The cost to the employer in this case is based on 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 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 purpose of calculating PAYE:

Engine    Deemed     Deemed    Deemed
capacity    value    value    value
of motor    (2009)    (2010-2013)    (2014
vehicle            to date)

Up to 1500cc    $550    $1 800    $3 600

Over 1500cc-2000cc    $660    $2 400    $4 800

Over 2000cc-3000cc    $880    $3 600    $7 200

Over 3000cc    $1,100    $4 800    $9 600

Inclusion of the Benefit for VAT Purposes

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

Reminder for Payment of Tax

Our valued clients are reminded that the PAYE for the month of October is due on or before November 10, 2016.

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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