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Are tuition fees of a capital nature?

09 June 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: A company is prepared to pay the tuition fees of an employee to complete the national qualifications required to become compliant as required by the Financial Services board. Can the fees be deducted as an expense, or is it regarded as capital nature?

A: We accept that the employer is "prepared to pay the tuition fees of an employee” because the employee’s work done for the employer requires this.  Such a benefit may be exempt from normal tax – see section 10(1)(q) of the Income Tax Act. 

As far as the deduction concerned (for the employer) the employer should be able to meet the burden of proof that it is not capital in nature – see the BP (SA) case.  If the purpose of the expense is in the production of income, in other words it qualifies under section 11(a), the deduction can be made.  

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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