Print Page
News & Press: Institute News

FAQ 10 October 2013

Thursday, 10 October 2013   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical


1. Can you claim a section 12H allowance for a learnership that is not directly linked with your trade?

Q: Assuming a company's trade was the manufacturing of shoes. It entered into a learnership agreement with its internal accounting/administration personnel. Would that company be able to claim the learnership allowance in respect of that type of learnership or would it only be applicable to a learnership that relates specifically to shoe manufacturing?

Section 12H does not specifically state whether the SETA with which a person must be registered and the learnership must be specifically or directly linked to the taxpayer's trade. However, I was always of the view that the learnership allowance was introduced to uplift the unskilled labour in South Africa in the various industries. Therefore I did not think that it could be applicable to, as noted in my example above, admin staff etc.

However, upon reading the wording of this section it is not clear whether there needs to be a direct link. Section 12H(2)(a)(ii) only uses the wording "that agreement was entered into pursuant to a trade carried on by that employer". The admin staff would also be assisting the taxpayer with its trade, although in a different capacity to that of the factory staff. As there is no restriction on the learnership needing to be specifically registered with a SETA which is directly linked to the taxpayer's trade, the s 12H allowance would be available to any learnership that is registered with any SETA as long as that learnership is pursuant to the taxpayer's trade (which is quite a wide reaching provision and would include learnerships for admin staff etc).

I have also posted this question to other institutes, but the response received does not provide adequate interpretation since the words "might be" is used which is not a definitive answer as to whether such allowance can be claimed. 

A: The purposes of this platform, same as for other institutions, are not for the purpose of providing a specific opinion, but merely to provide guidance and advice.

As stated, s 12H(2)(a)(ii) uses the wording "…that agreement was entered into pursuant to a trade carried on by that employer,…" The term "trade” is defined in s 1 of the Income Tax Act and includes every profession, trade, business, employment, calling, occupation, or venture. It is submitted that in this context the key word is ‘pursuant’, as the agreement had to be entered into pursuant (ordinary meaning – see below) of that trade. Trade is defined widely in s 1 and does not refer to or distinguish between primary and secondary activities (refer to the case of Burgess v CIR 55 SATC 185 1993 (4) SA 161 (A)).

The day to day operations of a specific trade is as much a part of a trade as the specific trade itself and it could be argued that those administrative tasks are pursuant of the trade as the person is involved in activities necessary for the primary activities. pursuant to preposition according to, agreeable to, agreeing to, commensurate with, compatible to, connorming to, consistent with,consonant with, in accord with, in accordance with, in harmony with.

Associated concepts: pursuant to the lawBurton's Legal Thesaurus, 4E. Copyright © 2007 by William C. Burton. Used with permission of The McGraw-Hill Companies, Inc.


I am not at liberty to provide you with any specific opinion in this regard but your interpretation appears to be supported by the wording of the Act.The critical factor that must be borne in mind is that in order to qualify for the learnership allowance a registered learnership agreement must have been entered into. You would have to determine whether the relevant SETA would in fact register such a learnership agreement for activities that do not directly relate to the primary activity of the employer in question.

2. Deductibility of s 6quin rebate in provisional tax calculation

Q: I was recently asked by a client whether they could deduct the foreign taxes paid in respect of management fees charged to their subsidiaries in foreign jurisdictions upon calculating their normal tax payable for provisional tax purposes. I assumed that similar to the section 6quat rebate these foreign taxes should be allowed as a deduction in terms of par 17(5) of the Fourth Schedule.

However, upon reading this paragraph it is noted that section 6quin is not included in par 17(5). I am assuming that this is an oversight as this section also makes reference to section 6(3)(a) which has also been deleted and is therefore irrelevant. My problem is that I have advised that the client could deduct this amount from normal tax payable for provisional tax purposes and only realised afterwards that the legislation does not actually provide for this.

An additional query in terms of section 6quin is the new subsection 3A which became effective in respect of years of assessment commencing from 1 July 2013. Am I correct in saying that if my client has a year of assessment commencing on 1 March of the first year in which this declaration (FTW01-form) would become applicable to my client, would be the 2015 year of assessment seeing that 1 March 2014 would be the first year of assessment commencing after 1 July 2013? Therefore it would be required to submit a declaration 60 days from the date of the foreign tax being withheld in respect of any amounts received from 1 March 2014. Am I interpreting this correctly?

The reason why this timing of submission of the FTW01-form is so important is due to the client charging monthly management fees. I need to make sure they do not fall foul of the timing provisions and end up with late submission penalties. 

A: On the first matter - whether a section 6quin rebate can be taken into account for provisional tax payments: Para 17(5) allows for the tax to be determined having regard to the items listed but also "to any other factors having a bearing upon the probable liability of taxpayers for normal tax". Given the wording of the returns and guides and the fact that a taxpayer would be entitled to the rebate in determining its probable liability for normal tax, there should be strong grounds to deduct the section 6quin rebate even though par 17(5) does not specifically list this.

On the second question: I agree with your views on the effective date. The Guide issued by SARS does not state anything about this transitional provision and does contain guidelines on the completion of the FTW01 declaration. It could possibly be argued that this requirement communicated in the external guide would fall into the wider scope of the Tax Administration Act and information that SARS require to administer a Tax Act. I would therefore think that it is prudent to rather submit the declaration (even if the transaction does not strictly fall into a year of assessment covered by s 6quin(3A)) and ensure that the client is entitled to the rebate.

3. VAT implications of services rendered in South Africa to a foreign client

Q: Will output tax be payable on services rendered (website and domain services in South Africa) if the client is in a foreign country. The services were rendered in South Africa?

A: I think that firstly one has to consider the nature of the supply which your client makes to the foreign company.

"Goods” are defined as: Corporeal moveable things, fixed property, any real right in such thing or fixed property, and electricity

"Services” is also widely defined and includes the granting, cession or surrender of any right or the making available of any facility or advantage. Ss 8 and 18(3) of the VAT Act furthermore have certain deeming provisions, none of which appear to have any bearing on the transaction described below. It is submitted that the supply constitutes a supply of "services” as a facility is made available.

In terms of s 11(2)(l) of the Act, the supply of a service will be zero rated if the services are directly supplied to that non-resident (as defined for VAT purposes (please note this differs from income tax)). The zero-rating does not apply if, amongst other, (1) the non-resident (or any other person to whom the service is rendered) is in the Republic at the time the services are rendered (refer to section 11(2)(l)(iii) or (2) the service is directly connected to movable property situated in the Republic at the time when the service is rendered (refer to section 11(2)(l)(ii)).

The question then remains: Is the supply of e-commerce (website, domain hosting etc.) connected to movable property of the foreign company situated in the Republic?No specific case law exists in South Africa to determine whether website and domain hosting can be said to be rendered directly in connection with movable property in South Africa at the time of the rendering of the service.

No clear view can therefore be expressed. The following guidance may however be useful in making the determination: In New Zealand case law (case of Wilson & Horton v CIR (1994) 16 NZTC 11,221) the GST legislation contains a provision similar in many respects to s 11(2)(l)) that a clear connection to identifiable movable property was required and that the requirement of connectedness to movable property has to be interpreted narrowly. In that case it was held that advertising space was not directly connected to the advertising medium (publication).

A similar argument may apply in the case of website and domain space located on a server in South Africa. It must however be noted that tax compliance relies on geographical boundaries and in cyber space these boundaries are non-existent and beyond a reasonable means of definition. The tax issues associated with e-commerce, specifically cross-border activities on the internet, remain unresolved and it was proposed in the 2013 budget speech that foreign businesses that supply digital goods and services be required to register as vendors in South Africa. No similar guidance has been proposed in respect of outward electronic commerce supplies.

4. Whether salary received by the employee and subsequently refunded to the employer is tax deductible?

Q: Client was absent from her work during the first four months of the 2013 year of assessment, but was paid her full salary for this period. At the end of June 2012 she resigned and was required to pay back her salary for this four months, which was determined in accordance with a certain formula that exceeded her salary income for the four months by R30 000. The full refund amount as determined by the employer was deducted in February 2013 from her pension fund pay-out and paid over to the employer.

The employer reflected the total salary received for the four months in question on the IRP5 tax certificate and the deductions as pension and employees' tax. No certificate reflecting the amount refunded under the source code 4042 was issued.Will the client be allowed to claim the full amount refunded (which exceeds her salary income and which will create a loss) as a deduction in the 2013 tax year in terms of section 11(nA) of the Income Tax Act? If not, should the deduction in question be limited to the salary income received? 

A: Section 11(nA) (read together with section 23(m)) specifically allows the following as a deduction: "so much of any amount, including any voluntary award, received or accrued in respect of services rendered or to be rendered or any amount received or accrued in respect of or by virtue of any employment or the holding of any office as was included in the taxable income of that person and is refunded by that person". This section therefore only allows a deduction in respect of the refund to the extent of the previously included salary income. It does not appear as if the additional R30 000 in any way constituted a refund on a lumpsum. It is therefore submitted that the formula would probably penalise a person when that person leaves the employment of the company. The refund in excess of the income included would not be deductible in terms of section 11(nA) or any other section of the Income Tax Act. Therefore the person would not be in a position where he/she ends up in a net assessed loss position.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

  • Tax Practitioner Registration Requirements & FAQ's
  • Rate Our Service

    Membership Management Software Powered by YourMembership  ::  Legal