SARS Interpretation Note 20 Issue 9: Additional deduction for learnership allowance (source: https://www.sars.gov.za/legal-intr-in-20-additional-deduction-for-learnership-agreements/)
INTERPRETATION NOTE 20 (Issue 9)
DATE: 10 April 2025
ACT : INCOME TAX ACT 58 OF 1962
SECTION : SECTION 12H
SUBJECT : ADDITIONAL DEDUCTION FOR LEARNERSHIP AGREEMENTS
Contents
Preamble .............................................................................................................................. 2
1. Purpose ..................................................................................................................... 2
2. Background ............................................................................................................... 2
3. The law...................................................................................................................... 2
4. Application of the law................................................................................................. 3
4.1 Registered learnership agreement............................................................................. 4
4.2 Requirements for the deduction of the annual allowance ........................................... 4
4.3 Requirements for the deduction of the completion allowance .................................... 5
4.4 Enhanced allowances – learners with a disability ...................................................... 5
4.5 Prohibition of learnership allowances ........................................................................ 6
4.6 The quantum of the annual allowance ....................................................................... 6
4.6.1 For 12 full months during any year of assessment ..................................................... 6
4.6.2 For each period of less than 12 full months during any year of assessment .............. 6
4.7 The quantum of the completion allowance ................................................................. 8
4.7.1 Learnership agreements for less than 24 full months................................................. 9
4.7.2 Learnership agreements equal to or exceeding 24 full months ................................ 10
4.8 The learner moves from an NQF level 6 to 7 ........................................................... 11
4.9 Substitution of employers ........................................................................................ 11
4.10 Termination of the learnership agreement ............................................................... 14
4.11 Reporting requirements ........................................................................................... 14
5. Case study .............................................................................................................. 14
6. Conclusion .............................................................................................................. 16
Annexure – The law ....................................................................................................................... 17
Preamble
In this Note unless the context indicates otherwise –
• “annual allowance” means a deduction granted under section 12H(2) and
(2A) during any year of assessment in which a learner is a party to a registered
learnership agreement;
• “completion allowance” means a deduction granted under section 12H(3),
(3A), (4) and (4A) in a year of assessment in which a learner successfully
completes a learnership;
• “NQF-level qualification” means a qualification to which an NQF level from 1
to 10 has been allocated in accordance with Chapter 2 of the National
Qualifications Framework Act 67 of 2008;
• “section” means a section of the Act;
• “SETA” means a sector education and training authority established under the
Skills Development Act;
• “Skills Development Act” means the Skills Development Act 97 of 1998;
• “the Act” means the Income Tax Act 58 of 1962; and
• any other word or expression bears the meaning ascribed to it in the Act.
All forms referred to in this Note are available on the SARS website at
1. Purpose
This Note provides clarity on the interpretation and application of section 12H which
provides for deduction of annual and completion allowances for registered learnership
agreements meeting the requirements.
This Note takes into account legislative amendments introduced by the Taxation Laws
Amendment Act 20 of 2021, effective from 1 April 2022 and amended by the Taxation
Laws Amendment Act 42 of 2024.
2. Background
Section 12H provides additional deductions to employers for qualifying learnership
agreements entered into before 1 April 2027. These additional deductions are intended
as an incentive for employers to train employees in a regulated environment in order
to encourage skills development and job creation. Training contracts qualifying for
these deductions are learnership agreements and apprenticeships registered with a
SETA. These additional deductions consist of an annual allowance and a completion
allowance and the amount of the allowance will depend on the NQF level held by the
learner before entering into the learnership agreement.
3. The law
The relevant sections of the Act are quoted in the Annexure.
4. Application of the law
Section 12H provides a deduction to an employer in addition to any other deductions
allowable under the Act for any registered learnership agreement if all the requirements
of section 12H are met.
If more than one employer is a party to a registered learnership agreement, only the
“lead employer” identified in the learnership agreement may claim the allowances
under section 12H.1 In practice, the “lead employer” will usually be the employer that
pays the learner’s remuneration, although this is not stated in section 12H, and the
matter is left to agreement between the employers. An employment agreement must
be in place between the learner and the “lead employer”.
An allowance granted under section 12H may be claimed only by the party identified
in the registered learnership agreement as the employer and, in the case of more than
one employer, the ”lead employer”.
It is not a requirement of section 12H that the employers be registered with the same
SETA. The allowance is not linked to the Skills Development Levy2 so employers who
are not levy payers may still claim the allowance.
Two types of deductions are available, namely –
• an annual allowance, to which the employer is entitled in any year of
assessment in which a learner is a party to a registered learnership
agreement;3 and
• a completion allowance during any year of assessment in which the learner
successfully completes the learnership.4
The key features of these allowances are that –
• the annual allowance is subject to a pro rata reduction if the registered
learnership agreement does not cover the full 12 months during any year of
assessment;5
• different rules apply in determining the completion allowance for registered
learnership agreements spanning periods of less than 24 months, and those
which cover 24 months or longer;6
• the quantum of these allowances depends on the NQF level held by the
learner;7 and
• the quantum of these allowances is increased if the learner is a person with a
disability.8
1 Paragraph (b) of the definition of “employer” in section 12H(1).
2 Payable under the Skills Development Levies Act 9 of 1999.
3 Section 12H(2) and (2A).
4 Section 12H(3), (3A), (4) and 4A.
5 Section 12H(2)(b) and (2A)(b).
6 Section 12H(3), (3A), (4) and (4A).
7 Section 12H(2)(a)(i), (2A)(a)(i), (3)(a), (3A)(a), (4)(a), (4A)(a).
8 Section 12H(5) and (5A).
4.1 Registered learnership agreement
A “registered learnership agreement” as defined in section 12H(1) comprises an
agreement registered in accordance with the Skills Development Act and entered into
between the learner and the employer before 1 April 2027.
The definition of “learner” in section 12H refers to a “learner” as defined in the Skills
Development Act. Section 1 of the Skills Development Act defines a “learner” as
including an apprentice, therefore, section 12H does include apprenticeships.
Under section 12H(2)(c) and (2A)(c), any learnership agreement which has not been
registered from the inception of the agreement will be deemed to have been registered
on the date it was entered into, provided it is registered within 12 months after the last
day of the employer’s year of assessment.
4.2 Requirements for the deduction of the annual allowance
The employer will qualify for the annual allowance if –
• during any year of assessment the learner is a party to a registered learnership
agreement with the employer;
• the learner holds an NQF-level qualification from 1 to 10;
• the agreement was entered into pursuant to a trade carried on by that employer;
and
• the employer has derived “income” as defined in section 1(1) from that trade.
The ordinary grammatical meaning of “pursuant to” means “in accordance with”.9 The
type of trade is not specified in section 12H and may thus be any lawful trade as
envisaged in the definition of trade in section 1(1). The employer must, however, derive
income from that trade in order to qualify for the allowance under section 12H.
The allowance applies only to a period during which a learner is a party to a registered
learnership agreement with an employer. Thus an employer will not qualify for the
annual allowance during any period in which –
• a learnership agreement is not registered, subject to the deeming provision of
section 12H(2)(c) and (2A)(c); or
• a learner is not in employment.
The definition of “employer” in section 12H(1) merely clarifies or expands the meaning
of that term. A learner who has not yet commenced employment cannot have an
agreement with an “employer” because there is no employment relationship between
them.
9 www.dictionary.com/definition/pursuant [Accessed 10 April 2025].
Example 1 – Date of commencement of annual allowance
Facts:
An employer’s year of assessment ends on the last day of February.
An employee commenced employment on 3 January 2024 and signed a three-year
learnership agreement on 10 January 2024. The agreement was registered only on
1 March 2024.
Result:
The employer will be entitled to a pro rata annual allowance for the year of assessment
ended on 29 February 2024 because –
• the learnership agreement was registered within 12 months of the end of the
2024 year of assessment, namely, on 1 March 2024; and
• is accordingly deemed to have been registered on 10 January 2024 when the
learnership agreement was entered into.
4.3 Requirements for the deduction of the completion allowance
The employer will qualify for the completion allowance if –
• during any year of assessment the learner is a party to a registered learnership
agreement with the employer;
• the learner holds an NQF-level qualification from 1 to 10;
• the agreement was entered into pursuant to a trade carried on by the employer;
• the learner successfully completed the learnership during the year of
assessment; and
• the employer derived “income” as defined in section 1(1) from that trade.
Section 12H(3), (3A), (4) and (4A) state that there must, in that year, be allowed to be
deducted from the income derived by that employer from that trade an amount of
R40 000 or R20 000, depending on the NQF level.
The deduction must be made against income derived from the particular trade in which
the employee is employed. There must accordingly at least be some income from the
particular trade in order to achieve the deduction. The wording does not, however,
prevent the allowance from creating a loss from the particular trade. There is also
nothing in the wording to prevent such a loss from being set off against income from
another trade.
4.4 Enhanced allowances – learners with a disability
In order to encourage employers to develop the skills of persons with a disability, the
annual and completion allowances are increased as follows for a learner who has a
“disability” as defined in section 6B(1) at the time of entering into the learnership
agreement –
• R20 000 for a learner holding an NQF-level qualification from 1 to 6;10 or
10 Section 12H(5).
• R30 000 for a learner holding an NQF-level qualification from 7 to 10.11
Form ITR-DD “Confirmation of Diagnosis of Disability”, which is available on the SARS
website, contains the criteria prescribed by the Commissioner for evaluating whether
a person has a disability.
4.5 Prohibition of learnership allowances
An employer may not claim any annual allowance or any completion allowance for a
new registered learnership agreement if –12
• a learner, who is party to the new registered learnership agreement, has
previously failed to complete any other registered learnership agreement to
which the employer or an associated institution was a party; and
• the other registered learnership agreement contains the same education and
training component as the new registered learnership agreement.
4.6 The quantum of the annual allowance
The annual allowance is deductible in each year of assessment in which the
learnership agreement is in force.13
4.6.1 For 12 full months during any year of assessment
The quantum of the annual allowance is equal to –
• R40 000 for a learner holding an NQF-level qualification from 1 to 6; or
• R20 000 for a learner holding an NQF-level qualification from 7 to 10.
If the learner is a person with a “disability” as defined in section 6B(1) –
• R60 000 (R40 000 + R20 000) for a learner holding an NQF-level qualification
from 1 to 6;14 or
• R50 000 (R20 000 + R30 000) for a learner holding an NQF-level qualification
from 7 to 10.15
4.6.2 For each period of less than 12 full months during any year of assessment
The annual allowance is a pro rata portion if the learner is a party to a registered
learnership agreement for less than 12 full months during the year of assessment.16
Apportionment will therefore apply if the learnership agreement commenced or ended
partway through the year of assessment.
The meaning of a “month” was considered by James JP in Subbulutchmi v Minister of
Police & another, in which he said the following:17
“According to the Interpretation Act 33 of 1957 a month means a calendar month. In the
absence of any clear indication to the contrary to be found in the words used in any
particular legislation a calendar month running from an arbitrary date expires with the day
in the succeeding month immediately preceding the day corresponding to the date upon
11 Section 12H(5A).
12 Section 12H(6).
13 Section 12H(2)(a).
14 Section 12H(5).
15 Section 12H(5A).
16 Section 12H(2)(b) and (2A)(b).
17 1980 (3) SA 396 (D) at 397.
which the period starts. Thus, if a calendar month commences on the 10th of one month it
will expire at the end of the 9th day of the succeeding month. See Nair v Naicker 1942 NPD
3 in which BROOME J undertook an extensive review of the cases decided up to that date.
This is in accordance with the ordinary civilian method of calculating periods of time in
which the first day is excluded and the last day included. See Joubert v Enslin 1910 AD 6
at 35; South African Mutual Fire and General Insurance Co Ltd v Fouche; AA Mutual
Insurance Association Ltd v Tlabakoe 1970 (1) SA 302 (A).”
The Constitutional Court in Ex parte Minister of Social Development and others18
confirmed the calculation of a month:
“This Court has as yet not considered the computation of time or time periods. The general
common-law rule is that, in the calculation of time the civilian method is applicable, unless
a period of days is prescribed by law or contracting parties intended another method to be
used. According to the civil computation method, a period of time expressed in months
expires at the end of the day preceding the corresponding calendar day in the subsequent
month.”
Thus, if an employer’s year of assessment ends on 31 December, and an employee
commenced a nine-month learnership on 10 February the learnership would be
completed on 9 November and there would be nine full months. But if the same
learnership commenced on 15 October of year one it would be completed on 14 July
of year two, and there would be two full months in year one and six full months in
year two.
The quantum of the annual allowance is equal to a pro rata portion of the relevant
amount indicated in 4.6.1.
The pro rata portion is calculated in the same ratio as the number of full months that
the learner is a party to the agreement during the year of assessment bears to 12 full
months.
Example 2 – Calculation of the annual allowance
Facts:
Employer A’s year of assessment ends on 31 December.
On 1 October 2023 Employer A entered into a 12-month registered learnership
agreement with Learner B (not a person with a disability) who holds an NQF-level 4
qualification.
Result:
2023 Year of assessment
Learner B is party to a learnership agreement with Employer A for three full months
during the year of assessment. Employer A may deduct a pro rata annual allowance
of R10 000 (3/12) of the R40 000 annual allowance.
18 2006 (4) SA 309 (CC) at paragraph 24.
2024 Year of assessment
Learner B is a party to a learnership agreement with Employer A for nine full months
during the year of assessment. Employer A may deduct a pro rata annual allowance
of R30 000 (9/12) of the R40 000 annual allowance.
See Examples 4 and 5 for the calculation of the completion allowance.
4.7 The quantum of the completion allowance
The completion allowance is granted once-off in addition to the annual allowance and
is deductible in the year of assessment in which the learner successfully completes
the learnership. Therefore, the allowance cannot be claimed in a subsequent year of
assessment should the employer fail to claim the completion allowance in the year of
assessment in which the learner successfully completes the learnership.
SARS requires sufficient proof of the successful completion of the learnership
agreement in order to allow the completion allowance under section 12H. Normally
confirmation from the relevant SETA is accepted by SARS to be confirmation of
successful completion. Many employers, however, are having difficulty in obtaining this
confirmation from the SETA in the year of assessment in which the learnership was
completed.
In view of these difficulties, SARS will consider alternative proof. Any objective
evidence as proof of successful completion will be accepted, for example –
• a statement of results issued by an accredited training provider;19
• an evaluation report by a registered assessor20 on workplace experience.
A specific list of what is considered to be objective evidence cannot be provided and
each case will be determined on its own facts.
Besides the objective evidence of successful completion, the employer must also
satisfy SARS that reasonable steps were taken to request confirmation of completion
from the SETA.
Example 3 – Completion date
Facts:
Employer C’s year of assessment ends on 31 December.
On 1 October 2023 Employer C entered into a 3-month registered learnership
agreement with Learner D (not a person with a disability) who holds an NQF-level 4
qualification. Learner D completed the learnership on 31 December 2023. The SETA
was notified of the completion of the agreement on 31 January 2024. The SETA
informed the employer on a letter dated 1 February 2024 that the learnership had been
successfully completed. The employer was in possession of documentary proof dated
31 December 2023 from the training provider that the learnership had been
successfully completed.
19 A training centre or college accredited by the SETA.
20 Registered with the SETA.
Result:
The completion allowance is granted only once the learner has successfully completed
the learnership.
At the end of the 2023 year of assessment (31 December 2023) the employer was in
possession of adequate proof of successful completion from the training provider and
may claim the completion allowance.
4.7.1 Learnership agreements for less than 24 full months
The quantum of the completion allowance is equal to –
• R40 000 for a learner holding an NQF-level qualification from 1 to 6;21 or
• R20 000 for a learner holding an NQF-level qualification from 7 to 10.22
If the learner is a person with a “disability” as defined in section 6B(1) –
• R60 000 (R40 000 + R20 000) for a learner holding an NQF-level qualification
from 1 to 6;23 or
• R50 000 (R20 000 + R30 000) for a learner holding an NQF-level qualification
from 7 to 10.24
Example 4 – Calculation of the completion allowance – learnership agreement of
less than 24 months
Facts:
Employer E’s year of assessment ends on 31 December.
On 1 October 2023 Employer E entered into an 18-month registered learnership
agreement with Learner F (not a person with a disability) who holds an NQF-level 4
qualification.
Result:
2025 Year of assessment
The learnership will be completed during the 2025 year of assessment on 31 March
2025. The learnership agreement is for less than 24 full months. Employer E may
deduct a completion allowance of R40 000 on the completion of the learnership under
section 12H(3).
21 Section 12H(3).
22 Section 12H(3A).
23 Section 12H(5).
24 Section 12H(5A).
4.7.2 Learnership agreements equal to or exceeding 24 full months
The quantum of the completion allowance is equal to –
• R40 000 for a learner holding an NQF-level qualification from 1 to 6 multiplied
by the number of consecutive 12-month periods within the duration of that
learnership agreement;25 or
• R20 000 for a learner holding an NQF-level qualification from 7 to 10 multiplied
by the number of consecutive 12-month periods within the duration of that
learnership agreement.26
If the learner is a person with a “disability” as defined in section 6B(1) –
• R60 000 (R40 000 + R20 000) multiplied by the number of consecutive 12-
month periods within the duration of that learnership agreement;27 or
• R50 000 (R20 000 + R30 000) multiplied by the number of consecutive 12-
month periods within the duration of that learnership agreement.28
For purposes of this calculation only full periods of 12 months are taken into account.29
Example 5 – Calculation of the completion allowance – learnership equals or
exceeds 24 months
Facts:
Employer G’s year of assessment ends on 31 December.
On 1 October 2022 Employer G entered into a 30-month registered learnership
agreement with Learner H (not a person with a disability) who holds an NQF-level 4
qualification.
Result:
2025 Year of assessment
Under section 12H(4) Employer G may deduct a completion allowance of R80 000,
which is calculated as R40 000 × 2 since there are two periods of 12 full months within
the duration of the agreement.
Note: The employer may deduct the completion allowance or any portion of it only if
the learner successfully completes the learnership in the year of assessment.
The registered learnership agreement may provide for an extension of the training
period when the employer is not satisfied that the learner has met the required level of
competency. Such an extended period will qualify for the purposes of section 12H(4)
and (4A).
25 Section 12H(4).
26 Section 12H(4A).
27 Section 12H(5).
28 Section 12H(5A).
29 Section 12H(4) and (4A).
4.8 The learner moves from an NQF level 6 to 7
A learner may enter into a learnership agreement and hold an NQF-level 6
qualification. During the year of assessment the learner may obtain a higher
qualification and as a result move to an NQF level 7. The employer’s claim would have
to be adjusted and the allowance would be calculated on a pro rata basis.30
Example 6 – Learner moves from NQF level 6 to 7
Facts:
Employer J’s year of assessment ends on 31 December.
On 1 October 2023 Employer J entered into a 12-month registered learnership
agreement with Learner K (not a person with a disability) who holds an NQF-level 6
qualification. On 1 April 2024 Learner K obtained an NQF-level 7 qualification. Learner
B successfully completes the learnership.
Result:
2023 Year of assessment
Learner K is party to a learnership agreement with Employer J for three full months
during the year of assessment. Employer J may deduct a pro rata annual allowance of
R10 000 (3/12 of the R40 000 annual allowance).
2024 Year of assessment
Learner K is a party to a learnership agreement with Employer J for nine full months
during the year of assessment, 3 months at NQF level 6 and 6 months at NQF level 7.
Employer J may deduct a pro rata annual allowance of R10 000 (3/12 of the R40 000
annual allowance at NQF level 6) and R10 000 (6/12 of the R20 000 at NQF level 7).
Employer J may deduct a completion allowance of R20 000, since Learner K is at NQF
level 7 at date of completion (section 12H(3A).
4.9 Substitution of employers
Under section 17(5) of the Skills Development, Act an employer may be substituted
with the consent of the learner and approval of the SETA that registered the learnership
agreement.
As a result, when a learner moves from Employer A to Employer B –
• employers A and B will be entitled to claim a pro rata portion of the annual
allowance in the year of assessment in which the learner changes employment;
• employer A will not be entitled to any further annual allowances or the
completion allowance;
• employer B will be entitled to future annual allowances, subject to
apportionment in the year of completion if the final period consists of less than
12 full months; and
Final Response Document on Taxation Laws Amendment Bill, 2016 at 31.
• employer B will be entitled to the completion allowance provided that the
learner successfully completes the learnership while in Employer B’s employ.
Example 7 – Substitution of employer
Facts:
Employer L and Employer M’s years of assessment end on 31 December.
On 1 January 2021 Employer L entered into a three-year registered learnership
agreement with Learner N (not a person with a disability) with an NQF-level 6
qualification. On 1 July 2022 Learner N leaves the employment of Employer L and
takes up employment with Employer M and complies with the provisions of the Skills
Development Act regarding substitution.
Learner N successfully completes the learnership on 31 December 2023.
Result:
Employer L
2021 Year of assessment
Employer L may deduct an annual allowance of R40 000 under section 12H(2)(a).
2022 Year of assessment
Employer L may deduct a pro rata annual allowance of R20 000 under
section 12H(2)(b), (6 / 12 × R40 000) because Learner N is a party to the learnership
agreement with Employer L for only six full months in the year of assessment
(1 January 2022 to 30 June 2022).
2023 Year of assessment
Employer L is not entitled to deduct any amount for either the annual allowance or the
completion allowance because Learner N is no longer a party to a registered
learnership agreement with Employer L.
Employer M
2021 Year of assessment
Employer M is not entitled to deduct any annual allowance because Learner N is not
a party to a learnership agreement with Employer M.
2022 Year of assessment
Employer M may deduct a pro rata annual allowance of R20 000 under
section 12H(2)(b) (6 / 12 × R40 000) because Learner N is a party to the learnership
agreement with Employer K for only six full months in the year of assessment.
2023 Year of assessment
Employer M may deduct an annual allowance of R40 000 under section 12H(2)(a)
because Learner N is a party to the learnership agreement with the employer for 12 full
months.
Employer M may also deduct a completion allowance of R120 000 under
section 12H(4), which is calculated as R40 000 × 3, since there are three periods of
12 full months within the duration of this agreement.
Example 8 – Substitution of employers having different years of assessment
Facts:
Employer O’s year of assessment ends on 31 December.
On 1 January 2021 Employer O entered into a three-year registered learnership
agreement with Learner P (not a person with a disability) with an NQF-level 6
qualification. On 1 July 2022 Learner P leaves the employment of Employer O and
takes up employment with Employer Q (30 June year-end) and complies with the
provisions of the Skills Development Act regarding substitution.
Learner P successfully completes the learnership on 31 December 2023.
Result:
Employer O
2021 Year of assessment
Employer O may deduct an annual allowance of R40 000 under section 12H(2)(a).
2022 Year of assessment
Employer O may deduct a pro rata annual allowance of R20 000 under
section 12H(2)(b) (6 / 12 × R40 000) because Learner P is a party to the learnership
agreement with Employer O for only six full months in the year of assessment.
2023 Year of assessment
Employer O is not entitled to deduct any amount for either the annual allowance or the
completion allowance because Learner P is no longer a party to a registered
learnership agreement with Employer O.
Employer Q
2021 and 2022 Years of assessment
Employer Q is not entitled to deduct any annual allowance because Learner P is not a
party to a learnership agreement with Employer Q during the period 1 January 2021 to
30 June 2022.
2023 Year of assessment
Employer Q may deduct an annual allowance of R40 000 because Learner P is a party
to the learnership agreement with Employer Q for a full 12 months in the year of
assessment ending 30 June 2023.
2024 Year of assessment
Employer Q may deduct a pro rata annual allowance of R20 000 under
section 12H(2)(b), (6 / 12 × R40 000) because Learner P is a party to the learnership
agreement with Employer Q for only six full months in the year of assessment, namely,
1 July 2023 to 31 December 2023.
Employer Q may also deduct a completion allowance of R120 000 under
section 12H(4), which is calculated as R40 000 × 3, since there are three periods of
12 full months within the duration of this agreement.
4.10 Termination of the learnership agreement
If a registered learnership agreement is terminated (whether by the employee
resigning or by the employer terminating the learner’s employment), the employer will
be able to deduct an amount equal to a pro rata portion of the annual allowance in that
year. The employer is not entitled to deduct any further annual allowances or the
completion allowance, since the learnership agreement is terminated and the
learnership is not completed.
4.11 Reporting requirements
For each year of assessment during which an employer is eligible for an annual or
completion allowance, the employer must under section 12H(8) submit to the SETA
with which the learnership agreement is registered, any information relating to that
learnership agreement required by the SETA in the form and manner and at the place
and time indicated by the SETA.
Any SETA with which a learnership agreement has been registered under the Skills
Development Act, must under section 12H(7) submit to the Minister of Finance any
information relating to that learnership agreement required by the Minister in the form
and manner and at the place and time that the Minister prescribes.
5. Case study
The determination of the amount deductible as a learnership allowance is illustrated in
the following example:
Example 9 – The determination of the amount deductible as a learnership
allowance
Facts:
ABC (Pty) Ltd (ABC) has a 31 March year-end.
ABC concluded learnership agreements with employees X, Y, Z, and employee D who
is a person with a disability, pursuant to a trade carried on by ABC. The learnership
agreements with X, Y, Z and D have been registered with the relevant SETA and titles
and codes have been allocated and issued by the Director-General: Department of
Employment and Labour. Assume that the current provisions of section 12H remain
unchanged for the duration of the learnerships.
(a) Employee X
X, with an NQF-level 6 qualification, entered into a 12-month learnership on
1 October 2022. The learnership agreement was registered with the SETA only on
1 December 2022. The learnership was completed successfully on 30 September
2023.
(b) Employee Y
Y, with an NQF-level 7 qualification, entered into an 18-month learnership on
1 October 2022. On 15 February 2023 Y left the employ of ABC without transferring
the learnership to a new employer under the Skills Development Act.
(c) Employee Z
Z, with an NQF-level 7 qualification, entered into a 12-month learnership
agreement on 1 January 2023. At the end of the 12-month period Z failed this
learnership and immediately entered into a new learnership with ABC which,
according to the SETA, had the same education and training component as the 12-
month learnership, but instead extended over a two-year period.
(d) Employee D
D, a person with a disability, with an NQF-level 6 qualification, entered into an 18-
month learnership agreement on 1 October 2022. On 31 March 2024 D
successfully completes the learnership.
Result:
(a) Employee X
Year of assessment ending 31 March 2023
An annual allowance of R20 000 (R40 000 × 6 / 12) is deductible because the
learner is a party to a registered learnership agreement with the employer for only
six months (1 October 2022 to 31 March 2023). Section 12H(2)(c) deems
registration of the learnership to occur on the date of commencement of the
learnership provided it is registered within 12 months after the last day of the
employer’s year of assessment.
Year of assessment ending 31 March 2024
1. An annual allowance of R20 000 is deductible because the learner is a party to
the registered learnership agreement with the employer for only six full months.
R40 000 × 6 / 12 = R20 000
2. A completion allowance of R40 000 is deductible, since the learnership
agreement is for less than 24 full months.
(b) Employee Y
Year of assessment ending 31 March 2023
An annual allowance of R5 000 is deductible because the learner is a party to the
registered learnership agreement with the employer for only three full months.
R20 000 × 3 / 12 = R5 000
The learner left the employ of the employer and therefore the registered learnership
agreement is terminated and no further annual allowance or any completion
allowance is deductible for that agreement.
(c) Employee Z
Year of assessment ending 31 March 2023
12-Month learnership
An annual allowance of R5 000 is deductible because the learner is a party to the
registered learnership agreement with the employer for only three full months.
R20 000 × 3 / 12 = R5 000
Year of assessment ending 31 March 2024
12-Month learnership
1. An annual allowance of R15 000 is deductible because the learner is a party to
the registered learnership agreement with the employer for only nine full
months.
R20 000 × 9 / 12 = R15 000
2. No completion allowance is deductible because the learner did not successfully
complete the learnership.
New registered learnership extending over two years
No amount is deductible, since section 12H(6) prohibits any deduction for the new
registered learnership agreement under the same employer and with the same
education and training component.
(d) Employee D
Year of assessment ending 31 March 2023
An annual allowance of R30 000 is deductible because the learner (a person with
a disability and NQF-level 6 qualification) is a party to the registered learnership
agreement with the employer for only six full months.
R60 000 × 6 / 12 = R30 000
Year of assessment ending 31 March 2024
1. An annual allowance of R60 000 is deductible because the learner (a person
with a disability and NQF-level 6 qualification) is a party to the registered
learnership agreement with the employer for twelve full months.
2. A completion allowance of R60 000 is deductible
The completion allowance in this case is R60 000 because the learnership
agreement is for a period of less than 24 months.
6. Conclusion
Section 12H provides an annual allowance and a completion allowance to employers
that are a party to a qualifying learnership agreement with an employee which has
been registered with a SETA and entered into before 1 April 2027.
Section 12H distinguishes between learners holding NQF levels 1 to 6 and NQF
levels 7 to 10 qualifications. The pre-existing qualifications of the learner entering the
learnership agreement as well as persons with a disability will determine the value of
the claim.
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Annexure – The law
Section 12H
12H. Additional deduction in respect of learnership agreements.—(1) For the purposes of
this section—
“associated institution”, in relation to any single employer, means—
(a) where the employer is a company, any other company which is associated with the
employer company by reason of the fact that both companies are managed or controlled
directly or indirectly by substantially the same persons;
(b) where the employer is not a company, any company which is managed or controlled
directly or indirectly by the employer or by any partnership of which the employer is a
member; or
(c) any fund established solely or mainly for providing benefits for employees or former
employees of the employer or for employees or former employees of the employer and
any company which is in terms of paragraph (a) or (b) an associated institution in relation
to the employer, but excluding any fund established by a trade union or industrial council
and any fund established for postgraduate research otherwise than out of moneys
provided by the employer or by any associated institution in relation to the employer;
“employer” means—
(a) where only one employer is party to a registered learnership agreement, that employer;
or
(b) in the case where more than one employer is a party to a registered learnership
agreement, the employer which is identified in that agreement as the lead employer;
“learner” means a learner as defined in section 1 of the Skills Development Act, 1998;
“registered learnership agreement” means a learnership agreement that is—
(a) registered in accordance with the Skills Development Act, 1998; and
(b) entered into between a learner and an employer before 1 April 2027;
“SETA” means a sector education and training authority established in terms of section 9(1) of the
Skills Development Act, 1998, and defined as such in section 1 of that Act;
“Skills Development Act, 1998” means the Skills Development Act, 1998 (Act No. 97 of 1998).
(2) (a) In addition to any deductions allowable in terms of this Act and subject to paragraph (b),
where—
(i) during any year of assessment a learner who holds a qualification to which an NQF level
from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the
National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a
registered learnership agreement with an employer; and
(ii) that agreement was entered into pursuant to a trade carried on by that employer,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R40 000.
(b) Where a learner is a party to a registered learnership agreement as contemplated in
paragraph (a) for a period of less than 12 full months during the year of assessment contemplated in
paragraph (a), the amount that is allowed to be deducted in terms of that paragraph must be limited to
an amount which bears to an amount of R40 000 the same ratio as the number of full months that the
learner is a party to that agreement bears to 12.
(c) If a registered learnership agreement is registered as contemplated in paragraph (a) of the
definition of “registered learnership agreement” within a period of 12 months after the last day of the
year of assessment contemplated in paragraph (a), the registered learnership agreement must be
deemed to have been so registered on the date on which the registered learnership agreement was
entered into as contemplated in paragraph (b) of that definition.
(2A) (a) In addition to any deductions allowable in terms of this Act and subject to paragraph (b),
where—
(i) during any year of assessment a learner who holds a qualification to which an NQF level
from 7 up to and including 10 has been allocated in accordance with Chapter 2 of the
National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a
registered learnership agreement with an employer; and
(ii) that agreement was entered into pursuant to a trade carried on by that employer,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R20 000.
(b) Where a learner is a party to a registered learnership agreement as contemplated in
paragraph (a) for a period of less than 12 full months during the year of assessment contemplated in
paragraph (a), the amount that is allowed to be deducted in terms of that paragraph must be limited to
an amount which bears to an amount of R20 000 the same ratio as the number of full months that the
learner is a party to that agreement bears to 12.
(c) If a registered learnership agreement is registered as contemplated in paragraph (a) of the
definition of “registered learnership agreement” within a period of 12 months after the last day of the
year of assessment contemplated in paragraph (a), the registered learnership agreement must be
deemed to have been so registered on the date on which the registered learnership agreement was
entered into as contemplated in paragraph (b) of that definition.
(3) In addition to any deductions allowable in terms of this Act, where—
(a) during any year of assessment a learner who holds a qualification to which an NQF level
from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the
National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a
registered learnership agreement with an employer for a period of less than 24 full
months;
(b) that agreement was entered into pursuant to a trade carried on by that employer; and
(c) that learner successfully completes that learnership during that year of assessment,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R40 000.
(3A) In addition to any deductions allowable in terms of this Act, where—
(a) during any year of assessment a learner who holds a qualification to which an NQF level
from 7 up to and including 10 has been allocated in accordance with Chapter 2 of the
National Qualifications Framework Act, 2008 (Act No. 67 of 2008), is a party to a
registered learnership agreement with an employer for a period of less than 24 full
months;
(b) that agreement was entered into pursuant to a trade carried on by that employer; and
(c) that learner successfully completes that learnership during that year of assessment,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R20 000.
(4) In addition to any deductions allowable in terms of this Act, where—
(a) during any year of assessment a learner who holds a qualification to which an NQF level
from 1 up to and including 6 has been allocated in accordance with Chapter 2 of the
National Qualifications Framework Act, 2008 (Act No. 67 of 2008), to a registered
learnership agreement with an employer for a period that equals or exceeds 24 full
months;
(b) that agreement was entered into pursuant to a trade carried on by that employer; and
(c) that learner successfully completes that learnership during that year of assessment,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R40 000 multiplied by the number of consecutive 12 month periods within the
duration of that agreement.
(4A) In addition to any deductions allowable in terms of this Act, where—
(a) during any year of assessment a learner is a party who holds a qualification to which an
NQF level from 7 up to and including 10 has been allocated in accordance with Chapter
2 of the National Qualifications Framework Act, 2008 (Act No. 67 of 2008), to a
registered learnership agreement with an employer for a period that equals or exceeds
24 full months;
(b) that agreement was entered into pursuant to a trade carried on by that employer; and
(c) that learner successfully completes that learnership during that year of assessment,
there must, in that year, be allowed to be deducted from the income derived by that employer from that
trade an amount of R20 000 multiplied by the number of consecutive 12 month periods within the
duration of that agreement.
(5) Where a learner contemplated in subsection (2), (3) or (4) is a person with a disability (as
defined in section 6B (1)) at the time of entering into the learnership agreement, the amounts
contemplated in subsection (2), (3) or (4) must be increased by an amount of R20 000.
(5A) Where a learner contemplated in subsection (2A), (3A) or (4A) is a person with a disability
(as defined in section 6B (1)) at the time of entering into the learnership agreement, the amounts
contemplated in subsection (2A), (3A) or (4A) must be increased by an amount of R30 000.
(6) This section does not apply in respect of any registered learnership agreement where—
(a) the learner that is the party to that agreement previously failed to complete any other
registered learnership agreement to which the employer or an associated institution in
relation to that employer was a party; and
(b) the registered learnership agreement contains the same education and training
component as that other registered learnership agreement.
(7) Any SETA with which a learnership agreement has been registered as contemplated in the
Skills Development Act, 1998, must submit to the Minister any information relating to that learnership
agreement required by the Minister in the form and manner and at the place and time that the Minister
prescribes.
(8) In respect of each year of assessment during which an employer is eligible for any deduction
contemplated in this section, the employer must submit to the SETA with which the learnership
agreement is registered any information relating to that learnership agreement required by the SETA in
the form and manner and at the place and time indicated by the SETA.
Section 6B(1)
“disability” means a moderate to severe limitation of any person’s ability to function or perform
daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if
the limitation—
(a) has lasted or has a prognosis of lasting more than a year; and
(b) is diagnosed by a duly registered medical practitioner in accordance with criteria
prescribed by the Commissioner;
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