Page 578 - SAIT Compendium 2016 Volume2

IN 66 Income Tax acT: InTeRPReTaTIon noTes IN 66
interest payable thereon, deductible from the income of the borrower. These privately-funded loans are, therefore, neither taxable nor tax deductible.
In terms of para 11(4)(b), no value is placed on a taxable bene t derived by an employee in consequence of the grant by any employer to an employee of any low-interest or interest-free loan for the purpose of enabling that employee to further his or her own studies.
Any scholarship or bursary which is granted subject to repayment due to non-ful lment of conditions stipulated in a written agreement will be treated as a bona de scholarship or bursary as indicated in 5.2 until such time as the non- compliance provisions of the agreement are invoked. In the year of assessment in which such provisions are invoked, the amount or amounts of the scholarship or bursary will be regarded as a loan and, if relevant, any bene t which an employee may have received by way of an interest-free or low-interest loan will constitute a taxable bene t in terms of para 2(f). The employee will not qualify for the exemption contained in para 11(4)(b), as the loan was not granted to enable the employee to study.
An employee will have received a taxable bene t in terms of para 2(h) if he or she is absolved from repaying a loan received from his or her employer to enable him or her to study.
5.7 Reimbursement of study expenses
As mentioned in 4.1, a reward or reimbursement to an employee for a quali cation, or for having successfully completed a course of studies, or reimbursement for study expenses borne by the employee, will represent (in the case of such reward), taxable remuneration. In the case of the reimbursement of expenses, such reimbursement is gross income in terms of para (c) of that de nition in s 1.
5.8 Study loans or bursaries taken over by new employer
An employee who had been granted a bursary, study loan or similar assistance on condition that the employee will render services to that employer for an agreed period, is generally required to refund that employer the full amount or a portion of the amount of the bursary if the employee leaves the employment of that employer before the expiry of the agreed period.
No value shall be placed on the bene t (that is, payment of employee’s debt by the new employer) if the employee has undertaken to work for the new employer for at least the unexpired period that had not been worked for the former employer, if the above is applicable and the new employer has paid a debt owed by the new employee to the former employer of such employee. This means that the bene t will not be subject to tax in the hands of such employee.
Example 5 – Study loan taken over by new employer
Facts:
T was granted a bursary of R10 000 by his employer on condition that he renders services to that employer for at least one year after the completion of that academic year. He is required to repay a pro rata portion relating to the period not complied with. After he has worked for a period of seven months out of the required 12 months, T accepts a new position with another employer. The new employer settles the debt of R4 167 (that is, 5/12 x R10 000) owed by T which arose as result of the condition imposed in the bursary contract.
Result:
There will be no value placed on the bene t of R4 167 paid by the new employer (that is, the bene t will not be subject to income or employees’ tax in T’s hands), if T gives an undertaking that he will work for the new employer for at least ve months (in consideration of the payment of R4 167). However, if such an undertaking has not been given by him, the bene t will be subject to employees’ tax in his hands. Accordingly, the new employer will be required to include this bene t in T’s IRP5 certi cate.
Note: The amount refunded (as per the above example), will be subject to normal tax as a recoupment in the hands of the former employer, had the bursary amount been allowed as a deduction for normal tax purposes in the hands of the former employer in the year of assessment in which the bursary was granted (refer to 5.5).
5.9 Other forms of study assistance
5.9.1 Specialised training courses
Expenditure in connection with in-house or on-the-job training or courses presented by training institutions for or on behalf of employers does not represent a taxable bene t in the hands of the employees of the employer if the training is job-related and at the employer’s premises. This is in terms of para 10(2)(c), which provides that no value will be placed on the bene t derived by employees on services rendered by the employer to his or her or its employees at their place of work for the better performance of their duties.
The types of training courses envisaged under this heading could include the following:
• Computer and word-processing courses
• Management and administration courses
• Bookkeeping courses
• Sales courses
• Courses in operating o ce and technical equipment
• Language courses for employees whose home language is not one of the o cial languages
• Public relations courses
• In-house courses presented by banks or building societies
• So -skill training, for example, work-life balance or employment equity training.
In-house or on-the-job training, research and education of the nature described above must be distinguished from professional and formal education resulting in quali cations attaching to the person of an employee. The employee will, subject to the provisions of s 10(1)(q), be regarded as having received a taxable bene t if, for example, admission to a particular profession or the ability to perform certain specialised duties is dependent on the employee obtaining an appropriate quali cation and the employer meets the employee’s costs of obtaining the required quali cation.
570 saIT comPendIum oF Tax LegIsLaTIon VoLume 2