The tax im­pli­ca­tions of toll fees

In­di­vid­u­als and com­pa­nies are obliged to in­cur a sig­nif­i­cant ad­di­tional ex­pense

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - BILLY JOUBERT

SOME tax im­pli­ca­tions of the new toll fees which will shortly be­come payable in Gaut­eng may po­ten­tially af­fect both in­di­vid­u­als and com­pa­nies. There may be ad­di­tional sig­nif­i­cant costs for in­di­vid­u­als. For in­stance, based on toll fees of 50c/km, an in­di­vid­ual trav­el­ling 100km round trip a day will be in­cur­ring an ad­di­tional ex­pense of around R1 000 a month. This raises ques­tions sur­round­ing the associated tax im­pli­ca­tions.

Cur­rently em­ploy­ees do not get re­lief for the costs of trav­el­ling to and from work, even though this is in­curred in the pro­duc­tion of their tax­able in­come. This rule is harsh and can be seen to rep­re­sent a de­par­ture of the ba­sic prin­ci­ples of tax law.

It be­comes more harsh when peo­ple are obliged to in­cur such a sig- nif­i­cant ad­di­tional ex­pense.

What hap­pens if an em­ployee with a com­pany car uses their com­pany petro­card to pay toll fees? In prac­tice this ex­pense prob­a­bly just slides through since most peo­ple con­sider that this ben­e­fit forms part of the tax­able value of a com­pany car. How­ever, that tax­able amount is in­tended to take into ac­count the value of the ve­hi­cle plus fuel and main­te­nance — not toll fees. There­fore, once the num­ber of toll fees in­creases it will be­come im­por­tant for com­pa­nies to en­sure that an em­ployee us­ing a credit card in this way ei­ther re­im­burses the com­pany for toll fees in­curred on pri­vate travel or is taxed on this ben­e­fit. This could re­sult in an ad­di­tional ad­min­is­tra­tive bur­den, both for in­di­vid­u­als and em­ploy­ers.

In prac­tice the new tolls will be col­lected through an e-tag sys­tem. There­fore the cur­rent sys­tem, un­der which driv­ers can ob­tain phys­i­cal re­ceipts in re­spect of each trans­ac­tion, will fall away. Pre­sum­ably reg­is­tered users will re­ceive a reg­u­lar state­ment pro­vid­ing de­tails of toll fees in­curred. It is likely that this state­ment will form the ba­sis for ex­pense claims by in­di­vid­u­als for toll fees in­curred on busi­ness travel.

The other po­ten­tial ef­fect on the tax ad­min­is­tra­tion of a com­pany is on the Value-Added Tax (VAT). In prin­ci­ple com­pa­nies and VAT reg­is­tered in­di­vid­u­als are en­ti­tled to claim back any VAT in­curred on toll fees associated with their en­ter­prise. How­ever, the doc­u­men­tary re­quire­ments for such claims are still un­clear at this stage.

VAT on toll fees in­curred by driv­ers of large com­mer­cial ve­hi­cles would usu­ally be claimable in full since such ve­hi­cles would only be used for com­mer­cial pur­poses. How­ever, toll fees on pas­sen­ger cars may re­late ei­ther to busi­ness or to pri­vate travel. This

It will also be im­por­tant to re­view the form of such (toll fee) state­ments and de­ter­mine whether they are tax in­voices for VAT pur­poses

means that the doc­u­men­tary re­quire­ments in this sit­u­a­tion are po­ten­tially more com­pli­cated.

In prac­tice it seems likely that VAT may be claimed by a com­pany on an amount cor­re­spond­ing to toll fees associated with busi­ness travel claims by its em­ploy­ees. How­ever, the doc­u­men­tary proof un­der­ly­ing these VAT claims may well com­prise doc­u­men­ta­tion (specif­i­cally toll fee state­ments) in the name of the in­di­vid­ual rather than the com­pany. It will also be im­por­tant to re­view the form of such state­ments and de­ter­mine whether they are tax in­voices for VAT pur­poses.

At this stage this is all fairly spec­u­la­tive since full de­tails of the ad­min­is­tra­tive as­pects of the new tolling sys­tem, in­clud­ing the pre­cise amounts of toll fees, are not yet known. Fur­ther top­ics for con­sid­er­a­tion in­clude the fol­low­ing:

Pos­si­ble tax re­lief for in­di­vid­u­als us­ing other forms of trans­port to and from work (such as the Gau­train).

Con­sid­er­a­tion of giv­ing tax re­lief for in­di­vid­u­als who elect to work from home rather than go­ing to the of­fice ev­ery day (given that the higher toll fees pro­vide a strong in­cen­tive to ex­plore this op­tion).

Whether toll fees should be sub­ject to VAT at all? It is rel­e­vant, in this re­gard, to note that toll fees can be viewed as be­ing es­sen­tially a form of tax­a­tion. There­fore, does the charg­ing of VAT on top of such fees not amount to “tax on tax”? If this ar­gu­ment is ac­cepted then it might be ap­pro­pri­ate, from a tax pol­icy point of view, for Trea­sury to con­sider ex­empt­ing, or zero rat­ing, toll fees.

It is im­por­tant for com­pa­nies to keep a care­ful eye on de­vel­op­ments go­ing for­ward. Once fur­ther de­tails of the new sys­tem be­come avail­able com­pa­nies should care­fully as­sess the po­ten­tial ef­fect on their tax ad­min­is­tra­tion sys­tem and plan ac­cord­ingly.

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