Is a company car taxed on what I earn or on the car's value?

On the car's value. The benefit is 3.5% of the determined value a month, which is based on what the car cost the employer including VAT, not on your salary. Your salary only matters at the end, because the benefit is added to your taxable income and taxed at your marginal rate. The article on how PAYE is calculated explains how that marginal rate is applied.

Do I need a logbook for a company car?

Yes, if you want to reduce the taxable value for business travel. The reduction is the ratio of business kilometres to total kilometres, and SARS will not accept it without a logbook of actual business trips. No logbook means you are taxed on the full private-use value.

What is "determined value"?

It is the cost of the car to your employer, including VAT, not its resale value and not what a new one would cost today. A deposit or contribution you made towards the car does not reduce it. The only reduction is a 15% reducing-balance write-down for each full year between the employer buying the car and you getting the use of it.

Why is only 80% put through my monthly PAYE?

The 80% inclusion leaves room for the business-travel reduction that happens on assessment, so you are not over-taxed each month. If your employer is satisfied that at least 80% of your use is for business, they include only 20% in your monthly PAYE instead.

Is a maintenance plan worth it for tax?

It lowers the monthly rate from 3.5% to 3.25% of determined value, but only if the plan was in place when the employer acquired the car. On a R400,000 car that is the difference between a R14,000 and a R13,000 monthly benefit before any business reduction.

- https://www.sars.gov.za/wp-content/uploads/Legal/Notes/LAPD-IntR-IN-2013-05-IN72-Right-of-Use-Motor-Vehicle.pdf - https://www.sars.gov.za/wp-content/uploads/Ops/Guides/PAYE-GEN-01-G02-Guide-for-Employers-in-respect-of-Fringe-Benefits-External-Guide.pdf - https://www.sars.gov.za/tax-rates/income-tax/rates-of-tax-for-individuals/

Company Car Tax in South Africa: the Fringe Benefit Explained

If your employer gives you the right to use a company-owned car for private trips, SARS treats that right as a taxable fringe benefit worth 3.5% of the vehicle's determined value each month. That value is added to your income and taxed, with 80% of it fed into your monthly PAYE. This is a different rule from a travel allowance, where your employer pays you cash and you drive your own car.

The two are taxed under completely different rules. A travel allowance is money in your pocket that you may partly claim back against business kilometres. A company car is a benefit in kind on the employer's vehicle, valued by a fixed percentage rather than by what you spend.

How the monthly value is worked out

The taxable benefit is a percentage of the "determined value" of the car, charged for each month you have the use of it. The percentage sits under paragraph 7 of the Seventh Schedule to the Income Tax Act.

The rate is 3.5% of the determined value per month as standard.
It drops to 3.25% per month if the car was subject to a maintenance plan when the employer acquired it.

Determined value is broadly the cost of the car to the employer, including VAT. It is not reduced by anything you contributed towards the car. If you only receive the use of the vehicle some time after the employer bought it, the determined value is reduced by 15% for each completed 12-month period, on the reducing-balance method, to reflect age.

What actually hits your payslip

Not all of the benefit is taxed through PAYE every month. Your employer includes 80% of the fringe-benefit value in your remuneration for monthly employees' tax. The remaining 20% is held back to allow for business travel that gets sorted out on assessment.

If your employer is satisfied that at least 80% of your use of the car will be for business, only 20% is put through PAYE instead. Either way, the full benefit is potentially taxable, and the final position is settled when you file, based on your logbook.

The reduction for business travel

The percentage assumes private use, so on assessment you reduce the value by your business share, but only if you kept a logbook. The reduction is proportional:

business-use reduction = (business kilometres / total kilometres) x value of private use

You can also reduce the value further where you personally paid for the car's licence, insurance, maintenance or the fuel for your private travel. Without a logbook, none of this is available and you are taxed on the full benefit.

A worked example

Take a car with a determined value of R400,000 and no maintenance plan, used for a full year in the 2026 tax year. The employee drives 30,000 km in total, of which the logbook shows 21,000 km were for business.

Monthly benefit = R400,000 x 3.5% = R14,000 Annual value of private use = R14,000 x 12 = R168,000 Business share = 21,000 / 30,000 = 70% Business-use reduction = 70% x R168,000 = R117,600 Taxable fringe benefit on assessment = R168,000 - R117,600 = R50,400

That R50,400 is added to the employee's taxable income. If their income puts them in the 31% bracket for the 2026 year (taxable income between R370,501 and R512,800), the tax on the car benefit is about R50,400 x 31% = R15,624 for the year.

The logbook is what pulled the taxable figure down, from R168,000 to R50,400. You can see how a cash travel allowance compares in the travel allowance guide and model the allowance side in the travel allowance calculator.

Company car or travel allowance

Neither option is automatically cheaper. A company car is valued on the vehicle's cost through the 3.5% rule, regardless of your actual running costs, so an expensive car with modest business use can be taxed heavily. A travel allowance is valued on the cash paid and the deemed or actual cost per business kilometre. Which one wins depends on the car's value, how much you drive for work, and who carries the running costs. In both cases, the logbook is what secures the business portion of the claim.