Skills Development offers an array of tax incentives – are you taking full advantage?

Skills development is one of the three priority elements on the B-BBEE scorecard and is an integral part of South Africa’s objective to reduce poverty and the decline in employment, increase job skills and improve the economic growth of the country. To assist companies with complying with skills development, a tax incentive for registered learnership agreements was introduced in 2002 and revised in 2016 in order to bolster these objectives.

The purpose of the tax incentive is to as it relates to the Income Tax Act 58 of 1962:

  • Encourage job creation by reducing the cost of hiring and training employees through learnerships
  • Promote skills development
  • Encourage human capacity development
  • Section 12H of the Income Tax Act provides for an allowance to employers in respect of qualifying ‘registered learnership agreement’ entered into between the employer and employee. The allowance is intended as an incentive for employers to train employees in a regulated environment in order to encourage skills development and job creation.

A ‘registered learnership agreement’ is defined as one which is:

  • Registered in accordance with the Skills Development Act, 1998
  • Entered into between a learner and an employer before a date specified in the Income Tax Act (after 30 September 2016, but before 1 April 2022)

Under section 12H there are two types of deductions available:

  1. Annual allowance: to which the employer is entitled in any year of assessment in which a learner is a party to a registered learnership agreement.
  2. Completion allowance: during any year of assessment in which the learner successfully completes the learnership.

The completion allowance is granted once-off in addition to the annual allowance and is deductible in the year of assessment in which the learner successfully completes the learnership, provided that sufficient proof of completion is supplied to SARS.

Apex Transformation Advisory has a highly skilled team to implement your Skills Development Learnerships and will ensure that you receive the appropriate tax benefits.