Binding private ruling 367: Employment tax incentive

The parties to the proposed transaction are:

The Applicant – A resident company

Company B – A resident non-profit company

The proposed transaction:

(i) The Applicant and Company B proposed to enter into an agreement with the stated purpose that students will be employed by the Applicant for the purpose of obtaining a qualification.

(ii) The students would participate in a training programme offered by Company B.

(iii) Company B would train the students for a year, supply a tablet, data and cash per month as incentive to stay in the programme.

(iv) The Applicant intends to invoice Company B for payroll related services which the Applicant will render monthly in respect of each student it proposes to employ.

(v) The Applicant intends to sign agreements with the students for a period of 12 months and pay the students a monthly salary.

(vi) The students will consent to forfeit their monthly salaries in order to be trained by Company B.

The ruling:

The ruling was as follows:

(i) No student would meet the definition of “employee” in section 1(1) of the Employment Tax Incentive Act 26 of 2013 (“ETI Act”);

Note that “employee” is defined therein as “a natural person who works directly for another person and who receives, or is entitled to receive remuneration, from that other person”. The ruling does not specify why this definition is not met.

(ii) The Applicant would not be entitled to claim an incentive, as contemplated in the ETI Act, in respect of any students.

Find a copy of BPR 367 here.

09/07/2021