Levies, Grants & Refunds

2014/2015 Mandatory Grant Application

Click here to view the FAQ regarding the new compulsory online submission for the Mandatory Grant for employers with more than 50 employees
                 
1. Is Value Added Tax (VAT) applicable to the Learnership Cash Grant (LCG) paid by Fasset?

If the grant is paid to the employer who is VAT-registered, the payment is subject to the zero rate of VAT. 

2. When are grants paid out? 

Subject to the completion and submission of the grant application, as well as the payments to South African Revenue Services (SARS) being distributed to Fasset timeously, the grants are paid out quarterly. Please refer to the Grant Payment Schedule.
 
3. I understand that learners are not subject to Skills Development Levy (SDL), i.e. I do not have to pay SDL on the salaries of our learners. Could you please let me know Fasset’s definition of learners for whom levies are not payable?
 
Companies do not pay SDL on learners. For this purpose, learners are defined as those ‘learners registered on a learnership agreement with the Seta’. This means that the formal learnership agreement must be signed and the learnership registration process is complete. Employers will receive a confirmation letter to indicate that the learner has been registered.

4. We have recently registered as an employer to deduct employees' tax. The purpose of the registration was to pay pensions to annuitants and consequently to deduct income tax on their behalf, and not to deduct tax in respect of any employees, which we do not have. The organisation is wholly owned by XXX Limited and all actions performed on behalf of the organisation is done by XXX Limited employees with this organisation being registered for deduction of tax as well as the payment of the Skills Development Levy and hence deductions are made in accordance. Given the above, may we apply for exemption of registration for the Skills Development Levy? 

Given that the organisation in question has no employees and operates as an 'empty' business entity they would not be required to pay SDL as they are not paying Pay As You Earn (PAYE). However, XXX Limited should pay SDL as presumably they have registered for PAYE. 

SDL is only payable on the payroll of employees. The organisation would not apply for an exemption as they do not fall within the exempt categories of the Act, but rather they should register and just complete nil returns on a monthly basis. 

5. As we are a small company, our total leviable amount paid to all employees during a 12 month period does not exceed R500,000. In the seven years of existence of this company it never has and probably never will. Do we still have to register or/and pay the Skills Development Levy? 

If you are registered for PAYE you must register for the Skills Development Levy no matter how small your payroll is. If you are not registered for PAYE and your payroll does not exceed R500,000 for the previous 12-month period you must still register in terms of the Skills Development Levies Act, but you are exempt from payment. 

6. I am an employer with employees that work only a few months per year. Are those employees subject to the levy and do they have to be included in the Mandatory Grant? 

The Skills Development Levy Act No 9 of 1999 defines the 'Employee' by referring to the Fourth Schedule of the Income Tax Act No 58 of 1962. Therefore, even short-term employees are employees in the meaning of the Skills Development Levy Act. If an employer is subject to levy payments because (for example) the total payroll is more than R500,000 during a 12-month period, remunerations paid to employees below the Income Tax threshold must be included in the calculation of levy. 

7. Could you please let me know whether VAT can be claimed on the SDL? 

According to the information on Vat News No 26, vendors are no longer entitled to claim input tax on SDL payments made to SARS. The last SDL payment which is regarded as VAT inclusive at 14% is the payment in respect of March 2005 which was due on 7 April 2005. Vendors may claim input tax on arrear SDL payments if they were paid on or before 7 April 2005. 

Where the Seta pays an employer a grant on or after the 1 April 2005 in order to train the employees of the employer, the payment is subject to the zero rate of VAT. 

Further details are available at www.sars.gov.za

8. How do I calculate the value of the Mandatory Grant due to me? 

1. It takes at least three months from the date the levy is paid to the SARS, for funds to reach Fasset. Grant payments, therefore, will not necessarily reflect the last levy paid by the company. 

2. A company will receive a full grant disbursement based on the levies Fasset has received from SARS. 

3. All company-specific information regarding levies received by Fasset and grants paid to the company, including dates and amounts, is available through password-controlled access to the Fasset’s Seta Management System (SMS). 

This system can be accessed through the Fasset website (Stakeholder login section) and the company’s user name and password must be obtained from the Fasset Call Centre (086 101,0001). The Fasset Call Centre can also assist users with access to the system. 

9. Is an employer able to claim for the cost of training? 

Every Seta works on a levy-grant system that has a mandatory portion. The way this works is that an employer is eligible to claim back a percent of this for submitting the grant application on or before the deadline. The Seta does not stipulate what kind of training must be planned. 

Over and above this, some Seta's have discretionary grants that support specific training initiatives. Each Seta will have different priority areas, depending on their sector's needs. Your client will have to ask the Seta to whom they are currently paying their levy what additional grants are available through their discretionary window. 

As the system is a levy-grant one, we do not do direct reimbursements for training costs. 

Further details on this can be found in the ‘getting started’ section of our website, which will also steer you towards more detailed information on specific areas, if necessary.

10. If a company/cc has two offices, which are separately registered at SARS as an employer (for PAYE). Is the 500,000 exemption applicable to each branch or the company/close corporation as whole? 

As the company has two separate levy numbers they are considered to be two separate entities and are therefore not eligible to pay SDL.

11. Am I able to contribute to SDL payments voluntarily if I fall below the threshold?
 
Fasset is unable to advise stakeholders whether or not they can contribute SDL payments voluntarily. All enquiries in this regard must be directed to SARS.

12. Is there any tax relief for the Learnership Cash Grant received? 
An employer will be allowed to deduct the following amounts in terms of the learnership grant received. 

Section 12 H of the income tax act states that: 

There shall be allowed to be deducted from the income derived by any employer during any year of assessment, an allowance determined in accordance with subsection (2), and where- 

a)That employer during that year of assessment entered into a registered learnership agreement with a learner in the course of any trade carried on by that employer or 
b) A learner during that year of assessment completed any registered learnership agreement entered into by that employer with that learner during that year or any previous year of assessment in the course of any trade carried on by that employer. 

1. Previously employed learners who commence a learnership (18.1) – is an amount of the lesser of
aa) 70 per cent of the annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer or
bb) R20,000 

2. Previously unemployed learners who commence a learnership (18.2) is an amount equal to the lesser of-
aa) The annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer; or
bb) R30,000; and
 
3. For the completion of any registered learnership agreement is an amount equal to the lesser of-
aa) The annual equivalent of the remuneration of that learner stipulated in the agreement of employment between that learner and employer or
bb) R30,000
 
4. For disabled an initial allowance of 150% of the annual salary up to a maximum of R40,000 (18.1)
aa) For disabled an initial allowance of 175% of the annual salary up to a maximum of R50,000 (18.2)
bb) For disabled persons completing a learnership an allowance of 175% of the annual salary up to a maximum of R50,000 

No deduction shall made by an employer under this section, unless that employer has provided to the Commissioner
a) The name of the Seta with which the learnership agreement is registered
b) The title and code of the learnership allocated and issued by the Director-General: Department of Labour in terms of regulation 

2(3) of the Learnership Regulations, 2001
c) The full names and identification number of the learner contemplated in the registered learnership agreement and
d) Proof that the employer has complied with all the requirements of the Skills Development Levies Act, 1999 (Act No. 9 of 1999). 

13. Can you explain the tax implications of Fasset Mandatory and Discretionary Grants? 
If any grant is paid to an employer that is registered for Value Added Tax (VAT), the payment is not subjected to VAT. 

Vendors are no longer entitled to claim input tax on SDL payments made to SARS. The last SDL payment which is regarded as VAT inclusive at 14% is the payment in respect of March 2005 which was due on 7 April 2005. Vendors may claim input tax on arrear SDL payments if they were paid on or before 7 April 2005. 

The Skills Development Levy paid by an employer is allowable as a tax deduction, in terms of section 11(a) of the Income Tax Act. 

Mandatory Grants paid by the Seta to applicant companies are subject to tax. 

Discretionary Grants paid by the Seta to applicant firms are subject to tax. 

SARS Practice Note 59 regarding the taxing of grants indicates that a government grant will only form part of a person's gross income if it is a trading, as opposed to a capital, receipt. It states that a grant will be a trading receipt when it is paid in order to assist in meeting a person's trading obligations or in order to assist in carrying on trading operations. 

An amount received for the purpose of establishing an income earning structure or as compensation for the surrender of such a structure, will be of a capital nature. More specifically, a payment received as compensation for discontinuing a part of a person's business operations is of a capital nature. 

The Note gives the following as examples of grants that are revenue in nature:

A grant consisting of portion of a person's Skills Development Levy payments that are refunded;
a grant consisting of a payment in advance of performance under a successful government tender to provide services to the government.
The Note is arguably correct in its view that the amount would be of a revenue nature provided that the grant is not given for the purpose of funding fixed assets of the grantee. Because companies get a tax deduction for the SDL paid (part of their employee expenditure), they should include it in their income for tax purposes should they be refunded a portion of it. 
www.sars.gov.za