In general, section 10(1)(q) provides an exemption from normal tax where a bursary or scholarship is granted for the benefit of the employee or any relative of the employee to further their education.
To qualify for this exemption, the following factors need to be complied with:
- The scholarship or bursary can only be granted for study at a recognised educational or research institution.
- If the scholarship or bursary is granted to an employee, that employee must agree to repay the employer any amounts received in respect of the bursary or scholarship if the employee fails to complete the studies for which the benefit was provided. There is no limit to the benefit being granted.
- If the bursary is granted to an employee’s relative, (i) the employee’s yearly remuneration may not exceed R600 000, (ii) the benefit is limited to R20 000 for studies up to NQF 4 and R60 000 for studies from NQF 5 and above, and (iii) the bursary may not reduce any remuneration to which the employee is entitled or might, in the future, become entitled to. In other words, the bursary may not replace a portion of the employee’s remuneration. When the bursary or scholarship benefit is granted to a disabled relative of the employee, the exemptions are raised to R30 000 and R90 000 respectively.
The purpose of the financial assistance should be to enable the person receiving the benefit to expand his or her knowledge or skills and, therefore, may cover a broad range of costs, such as tuition fees, registration and examination fees, books and equipment, accommodation, meals, and transport from a residence to campus.
It is important to understand whether a scholarship or bursary from your employer will be subject to normal tax or exempt. If there is any uncertainty we recommend that you approach your tax advisor to consider the particular facts.