Page 579 - SAIT Compendium 2016 Volume2

IN 66 Income Tax acT: InTeRPReTaTIon noTes IN 66
Fees payable by an employer in terms of a law, such as the Skills Development Act 97 of 1998, on prescribed classes or courses attended by his or hers or its employees, or fees refundable for the aforementioned reasons, will not constitute a taxable bene t in the employees’ hands. These types of courses are not granted to employees as a bene t or advantage of or by virtue of employment, or as a reward for services rendered or to be rendered, but by virtue of an obligation imposed by law. They are therefore not bene ts under the Seventh Schedule. The employer will qualify for a deduction on these payments in terms of s 11(a).
5.9.2 Remission of study fees by virtue of employment (teachers, lecturers and their relatives)
It is common practice for certain educational institutions, notably universities and private schools, to allow their employees and such employees’ close relatives to study at these institutions free of charge or at greatly reduced fees. While the marginal cost of the education of such employees and their relatives represents a taxable bene t under the Seventh Schedule, this bene t is regarded as a scholarship or bursary as contemplated in s 10(1)(q), and to which the limits discussed in 5.2 apply.
6. PAYE
The Guidelines for Employers (AS-PAYE-05-G1) which is available on the SARS website www.sars.gov.za contains instructions relating to the employees’ tax position of taxable scholarships, bursaries, study loans and bene ts relative thereto, and the duties of employers in this regard.
7. Conclusion
This Note provided clarity on the tax implications of any bona de scholarship or bursary granted to enable or assist any person to study at a recognised educational or research institution. Matters not covered by this Note, or instances of uncertainty, should be taken up with the local SARS of ce, citing full details.
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Annexure A – The law Section 10(1)(q)
(1) There shall be exempt from normal tax—
(q) any bona de scholarship or bursary granted to enable or assist any person to study at a recognized educational
or research institution: Provided that if any such scholarship or bursary has been so granted by an employer or an associated institution (as respectively de ned in para 1 of the Seventh Schedule) to an employee (as de ned in the said paragraph) or to a relative of such employee, the exemption under this paragraph shall not apply—
(i) in the case of a scholarship or bursary granted to so enable or assist any such employee, unless the employee agrees to reimburse the employer for any scholarship or bursary granted to that employee if that employee fails to complete his or her studies for reasons other than death, ill-health or injury;
(ii) in the case of a scholarship or bursary granted to enable or assist any such relative of an employee so to study—
(aa) if the remuneration derived by the employee during the year of assessment exceeded R100 000; and (bb) to so much of any scholarship or bursary contemplated in this subparagraph as in the case of any such
relative exceeds R10 000 during the year of assessment;
Paragraph 1 of the Seventh Schedule – ‘associated institution’
‘associated institution’, in relation to any single employer, means—
(a) where the employer is a company, any other company which is associated with the employer company by reason
of the fact that both companies are managed or controlled directly or indirectly by substantially the same persons;
or
(b) where the employer is not a company, any company which is managed or controlled directly or indirectly by the
employer or by any partnership of which the employer is a member; or
(c) any fund established solely or mainly for providing bene ts for employees or former employees of the employer
or for employees or former employees of the employer and any company which is in terms of para (a) or (b) an associated institution in relation to the employer, but excluding any fund established by a trade union or industrial council and any fund established for postgraduate research otherwise than out of moneys provided by the employer or by any associated institution in relation to the employer;
Paragraph 1 of the Seventh Schedule – ‘employee’
‘employee’, in relation to any employer, means a person who is an employee in relation to such employer for the purposes of the Fourth Schedule, excluding any person who prior to 1 March 1992 by reason of superannuation, ill- health or other in rmity retired from the employ of such employer, but including, in relation to any company, any director of such company and any person who was previously employed by, or was a director of, such company if such person is or was the sole shareholder or one of the controlling shareholders in such company and, for the purposes of paras 2(h) and 13, including any person who has retired as aforesaid and who, after his retirement, is released by his employer from an obligation which arose before the employee’s retirement to reimburse the employer for an amount paid by the employer on behalf of the employee or to pay any amount which became owing by the employee to the employer before the employee’s retirement;
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