Company car fringe benefit — how SARS taxes the right of use of a vehicle
Where an employer gives an employee the right to use a company vehicle, SARS taxes a monthly fringe benefit of 3.5% of the vehicle's determined value, reduced to 3.25% where the car is covered by a maintenance plan. Normally 80% of that benefit is subject to PAYE each month, and the value is reported under source code 3802 or 3816.
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The Payroll Africa editorial team is composed of registered tax practitioners, payroll administrators and BCEA specialists who maintain the SARS PAYE, UIF, SDL and ETI engines that power the platform. Every article is reviewed against the current SARS BRS and Basic Conditions of Employment Act before publication.
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Last updated 26 Aug 2026
Calculating the monthly benefit
The determined value is generally the retail market value of the vehicle including VAT, excluding finance charges. Multiply it by 3.5% a month, or 3.25% if the vehicle is subject to a maintenance plan at the time it is acquired, to get the fringe benefit value.
Where the employee pays a fixed monthly amount towards the use of the car, that consideration reduces the benefit. Fuel and maintenance costs borne by the employee can be claimed on assessment against business kilometres, not through payroll.
- 3.5% of determined value per month, standard
- 3.25% where a maintenance plan applies from acquisition
- Determined value includes VAT, excludes finance charges
- Employee contributions reduce the taxable benefit
- Operating lease vehicles use the actual lease cost plus fuel
The 80/20 PAYE inclusion
Only 80% of the fringe benefit is included in remuneration for monthly PAYE. If the employer is satisfied that at least 80% of the vehicle's annual use will be for business, the inclusion drops to 20%. The full value is still reported on the IRP5, and the final split is settled on assessment against a logbook.
Without an accurate logbook, SARS allows no business relief on assessment — so a logbook is the employee's only route to recovering over-withheld PAYE.
Source codes and payslip presentation
The benefit must appear on the payslip as a taxable income line with a matching non-cash deduction, so gross pay reflects the tax but net pay is unaffected by an amount the employee never receives in cash.
- 3802 — use of motor vehicle acquired by the employer (not via operating lease)
- 3816 — use of motor vehicle acquired via an operating lease
- Show the benefit as taxable income plus an offsetting non-cash line
- Keep the determined value on file for SARS verification
- Update the value if the employee changes vehicle mid-year
Frequently asked questions
Related guides
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