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Cape Town - Recent changes to how perks tax is calculated have prompted growing interest in some long term car lease options, according to the vehicle finance, leasing and asset-based lending division of Bidvest Bank.
“It’s impossible to give general guidance on how the new calculation will work out," said Byron Corcoran, head of asset-based lending at Bidvest Bank.
"Every case is different. In some instances, the tax benefit can be considerable. Car allowance recipients and their employers should check the variables.”
The taxable benefit of a company provided car is based on 80% of the vehicle’s purchase price including VAT multiplied by a tax rate of 3,5%.
The recent changes to perks tax allows the employee to apply the 3.5% tax rate to the monthly lease payment as opposed to the purchase price.
“In some instances, the company car recipient would be better off if their employer had acquired the vehicle by way of a full maintenance leasing or operating rental package as opposed to installment sale," said Corcoran.
"In other cases the tax benefit is negligible or there may be no benefit all."
The change in the perks tax calculation only came into force from March 1, 2013.
"It almost immediately prompted big interest in our operating rental packages," he said.
“This new development underlines the importance of careful decision-making. Scrutinise all the available packages."
The tax impact is important, but other factors also have to be considered.
"Seek advice from specialists, who offer all the options and have no particular bias toward any specific type of deal,” he concluded.
“It’s impossible to give general guidance on how the new calculation will work out," said Byron Corcoran, head of asset-based lending at Bidvest Bank.
"Every case is different. In some instances, the tax benefit can be considerable. Car allowance recipients and their employers should check the variables.”
The taxable benefit of a company provided car is based on 80% of the vehicle’s purchase price including VAT multiplied by a tax rate of 3,5%.
The recent changes to perks tax allows the employee to apply the 3.5% tax rate to the monthly lease payment as opposed to the purchase price.
“In some instances, the company car recipient would be better off if their employer had acquired the vehicle by way of a full maintenance leasing or operating rental package as opposed to installment sale," said Corcoran.
"In other cases the tax benefit is negligible or there may be no benefit all."
The change in the perks tax calculation only came into force from March 1, 2013.
"It almost immediately prompted big interest in our operating rental packages," he said.
“This new development underlines the importance of careful decision-making. Scrutinise all the available packages."
The tax impact is important, but other factors also have to be considered.
"Seek advice from specialists, who offer all the options and have no particular bias toward any specific type of deal,” he concluded.
