Travel Expenses To Know About as Director of a Small Company

In South Africa, the rules for deducting travel expenses for directors of small proprietary limited companies (Pty Ltd) are governed by the South African Revenue Service (SARS). 

These rules can be quite specific and are subject to change, so it's always best to consult the latest SARS guidelines or a tax professional. However, we can provide a general overview.

Business vs Personal Travel: Just like in other jurisdictions, travel expenses must be incurred in the production of income and for business purposes to be deductible. Personal travel expenses are not deductible.

Vehicle Expenses: If a company car is used, the company can deduct expenses related to the vehicle, including fuel, maintenance, insurance, and depreciation. However, if the vehicle is also used for personal travel, a fringe benefit tax may apply to the personal portion of vehicle use. Additionally, it's worth noting that certain conditions apply when claiming these expenses. 

For example, 80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE, unless it's determined that at least 80% of the vehicle's use will be for business purposes.

Mileage Allowance: If a director uses a personal vehicle for business purposes, the company can reimburse the director based on the SARS-approved mileage rates. This reimbursement, up to the prescribed rate, is tax-free for the director and deductible for the company.

Travel and Accommodation: Costs associated with business travel, such as flights, hotels, car rentals, and meals, are generally deductible. It's essential to maintain detailed records and receipts to substantiate these expenses.

Subsistence Allowance: Directors travelling for business may receive a subsistence allowance for meals and incidental expenses. SARS provides guidelines on tax-free allowance limits. Amounts above these limits may be taxable.

Documentation and Record Keeping: This bit is important! Maintaining accurate records is crucial. This includes logbooks for vehicle use, detailing the business purpose, date, and distance of each trip, as well as all receipts and invoices related to travel expenses.

Fringe Benefits Tax: If the company provides certain travel benefits (like a company car for personal use), these may be subject to fringe benefits tax, which needs to be reported and paid by the company.

VAT Implications: If the company is VAT-registered, it may be able to claim back VAT on certain travel expenses, subject to SARS regulations. Always get an invoice with the VAT numbers and details correctly displayed on it

Always ask for help if you are unsure. We are here to help and guide you.