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Learnership Agreements Tax Implications

November 27th, 2021

Learnership agreements are a popular method of training new employees in South Africa. These agreements are regulated by the Skills Development Act and offer a way for employers to provide their staff with accredited training programs to improve their skills and knowledge. While there are many benefits to learnership agreements, it is important to consider the tax implications of such agreements.

Firstly, it is essential to understand that learnerships are treated as normal employment for tax purposes. This means that employers are required to deduct PAYE from the stipend paid to learners, based on the applicable tax tables. As learnerships usually involve a fixed stipend amount, it is important to ensure that the correct tax is being deducted from learners` salaries.

Further, the stipend paid to learners under learnership agreements is regarded as remuneration, and this has implications for the tax deduction that employers can claim. Employers can claim a tax deduction for the stipends paid to learners as long as the learners` salaries do not exceed the tax threshold, which is currently set at R83,100 per annum. If the learners` salaries exceed this amount, then the employer will not be able to claim the full tax deduction.

Additionally, employers should be aware that the nature of the training provided can affect the tax treatment of learnership agreements. If the training provided is not aligned with the employer`s business, then the South African Revenue Service (SARS) may deem the learnerships to be a personal benefit to the learners, and this will affect the tax treatment of the stipend paid to learners.

It is also important to consider the VAT implications of learnership agreements. While training fees paid to an accredited training provider are generally exempt from VAT, stipends paid to learners are subject to VAT. Employers should ensure that they include VAT in the stipend paid to learners and that they correctly account for this VAT in their VAT returns.

In conclusion, learnership agreements offer an excellent way for employers to provide accredited training to their staff, and these agreements can have a positive impact on the skills and productivity of learners. However, it is important for employers to consider the tax implications of learnership agreements and to ensure that they are complying with all relevant tax laws and regulations. By doing so, employers can ensure that they are maximizing the benefits of learnership agreements while minimizing their tax liabilities.

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