It depends on whether the scholarship is awarded by an employer or not.
22 Nov 2022 00:31
I am a South African studying in Belgium and am on a full scholarship, which pays me about €3 000 [around R53 245] per month, which is not taxed in Belgium (tax-free).
The money I receive from my scholarship is to cover my living expenses in Belgium. However, a portion is transferred to my South African bank account so that I can support my family and honour my SA debt obligations. I was employed full-time in SA before receiving the Belgian scholarship.
As I am still a SA tax resident, will the South African Revenue Service (Sars) at some point want me to pay tax on the money I receive from my scholarship? I do plan to return to SA after I complete my studies, so there would be no need to cease my SA residency, I think.
Thank you for your question, which is currently pertinent as studying abroad is becoming more frequent and more accessible.
Before discussing whether the funds received from a scholarship or bursary are taxable, it is important to understand Sars’s definition of income, and how it relates to your particular case.
According to Sars, income includes remuneration earned by a person (either an individual or legal entity) for goods and/or services provided, or income received from various sources of annuities in respect of those who are in retirement. Once these funds are received, they are seen as taxable income and a portion of this income will be taxed according to the income tax sliding scale.
However, there are a number of tax exemptions that are available to taxpayers such as Section 10 (1) (q) of the Income Tax Act, which directly relates to bursaries and scholarships.
According to the act, a bona fide bursary or scholarship that is awarded to a person to facilitate their studies at an established education institution, university or research facility is tax-exempt.
That said, if a bursary or scholarship is awarded by an employer or any linked association in relation to an employee or an employee’s relative, those funds may be subject to tax if:
- The employee fails to complete their studies and/or research and no arrangement has been made to refund the employer; or
- The bursary or scholarship awarded to an employee’s relative exceeds R600 000 per year. In this regard, no tax will be paid where the bursary or scholarship is limited to R20 000 per month from Grades R to 12 (NQF levels 1 to 4) or R60 000 per year for NGF levels 5 to 10.
So, although in terms of the Income Tax Act your worldwide income must be included for the purposes of tax, if your bursary or scholarship complies with the terms of Section 10(1)(q) as set out above, it will be exempted for tax purposes. We recommend that you speak to a professional tax consultant or an accountant to provide the advice you seek.
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