FAQ: How are travel expenses for which I was reimbursed treated for PAYE purposes?

WHAT IS A TRAVEL ALLOWANCE

A travel allowance is any allowance paid or advance given to an employee in respect of travelling expenses for business purposes.

The following two situations are envisaged with regards to travel allowance, namely:

a travel allowance given to an employee to finance transport (for example, a set rate or amount per pay period); and
a reimbursement given to an employee based on actual travel.

Any allowance or advance in respect of travelling expenses not expended on business travelling is deemed to have been spent on private travelling (this includes travelling between the employee’s place of residence and his / her place of employment).

FIXED TRAVEL ALLOWANCE

A fixed travel allowance is an allowance which is given as a fixed amount to an employee towards travelling expenses for business purposes.

These amounts are normally paid as part of the employees’ remuneration package (weekly, fortnightly, monthly, etc.)

REIMBURSIVE TRAVEL ALLOWANCE

A reimbursive travel allowance is an allowance which is based on the actual distance travelled for business purposes (excluding private travel). These amounts are normally paid by an employer to an employee by multiplying the actual business kilometres travelled by a rate per kilometre.

EMPLOYEES’ TAX TREATMENT

Fixed travel allowance: Only an 80% portion of the fixed travel allowance is subject to the deduction of employees’ tax. If the employer is satisfied that the vehicle is used more than 80% for business purposes, only 20% of the fixed travel allowance is subject to the deduction of employees’ tax.

Reimbursive travel allowance: The reimbursive allowance might be a taxable or non-taxable allowance.

A non-taxable reimbursive allowance is a reimbursive amount, based on actual business kilometres travelled, which is deemed to be expended on business travelling if such reimbursive amount –

does not exceed the rate per kilometre as fixed by the Minister of Finance; and
no other form of compensation, for example another reimbursement (other than for parking or toll fees) or a fixed allowance, has been given/paid to the employee.

A reimbursive travel allowance that is deemed to be expended on business travelling (that is, one that complies with both criteria mentioned above), is a non-taxable reimbursive travel allowance and no employees’ tax must be deducted from such reimbursement.

A reimbursive travel allowance which DOES NOT comply with both criteria mentioned above, is a taxable reimbursive travel allowance and employees’ tax must be deducted from any amount paid that exceeds the prescribed rate per kilometre. The amount paid that does not exceed the prescribed rate is not subject to PAYE withholding. The amount paid that exceeds the prescribed rate is subject to PAYE withholding.

INCOME TAX ASSESSMENT TREATMENT

No tax liability will arise if you only received a non-taxable travel reimbursement during the whole year of assessment.

If any amount other than a non-taxable travel allowance was received during the year (for example, in addition to a non-taxable travel allowance, a fixed allowance or a taxable reimbursement was also received) then all amounts received will be added together on assessment.

You will be allowed to claim business travel expenses against the allowance (according to the prescribed rules and limits) and the portion exceeding the claim will be taxable on assessment.

IRP5/IT3(a) COMPLETION

The fixed travel allowance and/or reimbursive travel allowance must be reported as follows:

code 3701 – full amount (100%) of the fixed travel allowance;
code 3702 – taxable reimbursive travel allowance, where the reimbursive travel allowance is more than the prescribed rate per kilometre, the portion of the travel allowance up to this rate (being business kilometres travelled x the prescribed rate);
code 3703 – non-taxable reimbursive travel allowance, where the rate used by the employer to reimburse you is less than the prescribed rate per kilometre and no other amount is received;
code 3722 – reimbursive travel allowance, where the reimbursive travel allowance is more than the prescribed rate per kilometre, the portion of the travel allowance over and above the prescribed rate [being total business kilometres travelled * (rate used by employer – prescribed rate)];