n Business Tax and Company Law Quarterly - The benefits of a Section 12H allowance : long may it last

Volume 7, Issue 3
  • ISSN : 2219-1585


The introduction of section 12H of the Income Tax Act 58 of 1962, inserted by section 18(1) of Act 30 of 2002, and subsequently amended, was to encourage employers to create and develop skills, and to create jobs. Section 12H is an incentive to employers offering learnerships registered with a Sector Education and Training Authority ('SETA') and apprenticeships registered with the Department of Labour, and provides an additional tax deduction over and above the deduction of salary costs. However, on 1 October 2016 the incentive comes to an end in respect of so-called 'registered learnership agreements' entered into between learners and employers. SARS and the National Treasury are currently in the process of extending the term of section 12H because its incentives by way of generous tax allowances can be advantageous to employment.

This article examines the various allowances available within the section and illustrates the benefit of the section to employers by way of a number of examples. Some of the complexities in the interpretation of the meaning of a 'full month' within a tax year are also explored, because, depending on when a learnership commences during a tax year, a full month may not necessarily be completed in that year.
Section 12H distinguishes between a base allowance, which is an annual deduction of R30 000 per employee with no disability, and R50 000 per disabled employee. In the year in which the employee successfully completes the learnership contract, a completion allowance of R30 000 will be deductible from the employer's income per learner with no disability, and R50 000 per disabled learner. The completion allowance will increase if the learnership agreement is for a period of 24 months or more. The R30 000 allowance is increased by multiplying this amount by the number of consecutive 12-month periods of the learnership agreement. So, for a 24-month learnership agreement the completion allowance will amount to R60 000.

Loading full text...

Full text loading...


Article metrics loading...


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error