SARS clarifies what transport services "rendered by the employer" means


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To assist employers and employees with over-coming transport-related difficulties, the Income Tax Act, 1962 (the Act) introduced a mechanism to allow employers to provide transport services to their employees and that, although qualifying as a taxable fringe benefit in the employees' hands, no taxable value was given to such benefit.

However, uncertainty arose as to what "any transport service rendered by any employer" in paragraph 10(2)(b) of the Seventh Schedule means.  SARS has now clarified under what circumstances no value can be given to the employer rendered transport services in Binding General Ruling (Income Tax) 50 read with Interpretation Note 111. As a result of SARS' clarification, employers are now better able to structure the provision of transportation to their employees. SARS' clarification is welcomed and provides scope for additional employment opportunities within organisations as well as a market for niche transport businesses.

In summary, in order for the no value provision to apply, the transport service must be rendered by the employer directly i.e., from a vehicle in its fleet by a driver on its payroll. An employer may also contract another person to provide transport services to employees where the employer makes it clear in the conditions under which transport services are provided, that:

  • the transport is provided exclusively to employees along pre-determined routes;

  • the employees may not request transport services on an infrequent and individualised basis; and

  • no employee may be a party to the services contract i.e., the contract for providing the services may only be between the employer and transport service provider.

Employees will not be unintentionally subjected to fringe benefit tax on employer provided transport services, where the above conditions are met. Notably, the provision of and access to general public transport is not regarded as a transport service provided by the employer for no value.  Also, giving employees a "transport allowance" to catch public transport will still give rise to a taxable fringe benefit in employees' hands.

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