What is Code 3704 on a South African Payslip?
Local subsistence allowance explained — when it is tax-free, the SARS prescribed rates, the overnight requirement, and what happens when you are paid above the limit.
3704Code 3704 is a local subsistence allowance — paid by your employer to cover meals and incidental expenses when you work away from home overnight within South Africa. At the SARS prescribed rate (R452/day for meals and incidentals, or R141/day for incidentals only in 2025/2026), and with an overnight stay, this allowance is completely tax-free.
What Code 3704 Means
Code 3704 is a local subsistence allowance — an amount paid to cover the day-to-day costs of living while working away from your usual place of work or home within South Africa. This typically includes meals, drinks, tips, local transport to and from meals, and small incidentals like laundry. It does not include accommodation, which is typically reimbursed separately on receipt.
Employees who regularly travel within South Africa for work — sales representatives, site supervisors, auditors, technicians, and anyone required to spend nights in hotels or guesthouses — commonly receive code 3704 payments alongside travel (code 3701 or 3702) and accommodation reimbursements.
SARS provides prescribed daily rates for local subsistence. Payments within these rates are exempt from income tax, making the subsistence allowance a genuinely tax-free benefit for qualifying employees. Above the rates, or without an overnight stay, the amount becomes taxable income subject to PAYE.
The SARS Prescribed Rates and Tax-Free Conditions
For the code 3704 allowance to be tax-free, three conditions must be met simultaneously:
- The employee must spend at least one night away from their usual place of residence or business
- The daily amount must not exceed the SARS prescribed rate for local subsistence
- The allowance must genuinely be for meals and incidental expenses — not a disguised salary supplement
| Scenario | Prescribed Rate (2025/2026) | Tax Treatment |
|---|---|---|
| Meals and incidental costs — overnight stay | R452 per day | Exempt from PAYE |
| Incidental costs only (accommodation and meals provided) | R141 per day | Exempt from PAYE |
| Day trip — no overnight stay (any amount) | N/A | Fully taxable |
| Amount above prescribed rate — overnight stay | Excess over limit | Excess is taxable |
The overnight requirement is absolute. If you travel from Durban to Johannesburg for a meeting and return the same evening, any subsistence your employer pays — regardless of how much — is fully taxable income. The exemption applies only when a night away from home is involved. If your employer pays R452 for a day trip, PAYE must be deducted on the full R452.
How It Affects Your Take-Home Pay
When the overnight condition and prescribed rates are met, code 3704 has zero impact on your take-home pay — the allowance is paid in full with no PAYE deduction. It still appears on your IRP5 for SARS record-keeping, but the exempt amount does not increase your taxable income for the year.
| Scenario | Days Away | Employer Pays | Taxable | PAYE Deducted |
|---|---|---|---|---|
| Sales trip — meals and incidentals, overnight | 4 nights | R1,808 (4 × R452) | R0 | R0 |
| Site visit — incidentals only (meals provided), overnight | 3 nights | R423 (3 × R141) | R0 | R0 |
| Day conference — no overnight | 0 | R300 | R300 | ≈R78 at 26% |
| Overnight but paid above limit | 2 nights | R1,200 (R600/day) | R296 excess | ≈R77 at 26% |
Frequently Asked Questions
What does code 3704 mean on my payslip?
Code 3704 is a local subsistence allowance — an amount your employer pays to cover meals and incidental expenses when you are required to work away from home overnight within South Africa. At or below the SARS prescribed rates (R452/day for meals and incidentals, R141/day for incidentals only in 2025/2026), the allowance is exempt from PAYE provided there is a genuine overnight stay.
Is a local subsistence allowance taxable?
Only if there is no overnight stay, or if the payment exceeds the prescribed rate. At or below R452 per day (meals and incidentals) or R141 per day (incidentals only), with a genuine overnight stay, the allowance is completely tax-free. Day trips are always taxable regardless of amount. Amounts above the prescribed rate have the excess taxed as ordinary income.
What are the SARS prescribed subsistence rates for 2025/2026?
For local (within South Africa) subsistence: R452 per day if you are covering both meals and incidental expenses, and R141 per day if you are covering incidental costs only (because the employer provides or pays for accommodation and meals directly). Verify the current rates at sars.gov.za at the start of each tax year — they are updated annually.
Does code 3704 appear on my IRP5?
Yes. The full gross amount of subsistence paid under code 3704 appears on your IRP5, even if it is entirely exempt from tax. SARS uses this to confirm the total remuneration package and to verify that the exempt amounts were correctly applied. The tax-exempt portion does not increase your taxable income — it is reflected for transparency only.
What counts as incidental costs for the R141/day rate?
Incidental costs are small personal expenses incurred during a trip where your employer is already covering accommodation and meals: tips to hotel staff and waiters, local transport to and from meals, laundry costs, and similar minor expenses. The R141/day rate is for situations where you are not out-of-pocket for meals — only for those small daily extras. If you are paying for your own meals, the R452/day rate applies.
What if my employer pays subsistence for a day trip?
The full amount is taxable income regardless of how much is paid or how long the day trip lasts. The overnight requirement is a hard condition — SARS does not allow exemptions for day trips however long or inconvenient they are. If your employer pays you a flat daily rate without distinguishing overnight and day-trip payments, discuss with your payroll department — the day-trip amounts should have PAYE deducted.