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Thread: Taxation of Economic Development Grant

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    Taxation of Economic Development Grant

    Hi,

    How will an Economic Development grant received from another entity be treated for tax?

    Ie. An entity qualifies as a BEE business and another entity (non related entity) grants R331,000 to this BEE entity. The R331,000 is split as R160k as grant and R171k as loan to be repaid to grantor.

    Please help :-)

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    Site Caretaker Dave A's Avatar
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    What is the business of the granting entity?
    The trouble with opportunity is it normally comes dressed up as work.

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    Hi Dave,

    The grantor is in the business of stocking, processing and distributing steel.

    The beneficiary is in the business of pallet making and also makes bricks.

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    Site Caretaker Dave A's Avatar
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    So the business of giving or receiving grants is not part of their core business then.
    The trouble with opportunity is it normally comes dressed up as work.

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    No. The grantor accumulates BEE points for this investment in the beneficiary...

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    Silver Member geraldenek's Avatar
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    how is the grant going to be utilized?
    Geraldene Kapp
    Professional Tax Help
    www.mytaxhelp.co.za

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    Quote Originally Posted by geraldenek View Post
    how is the grant going to be utilized?
    The R160k grant: R80k Raw Materials, R5k Admin, R5k Training, R70k Business Coaching

    The R171k loan: R50k Production overheads, R100k Machinery, R21k Equipment

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    Silver Member geraldenek's Avatar
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    The grant received is normal income and taxed as normal. Because this is not a government grant no exclusions apply. And the company is not a NPO and it is not used for research and development.


    They are not going to use it for learnership agreements as defined in tax?
    Geraldene Kapp
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    www.mytaxhelp.co.za

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    Quote Originally Posted by geraldenek View Post
    They are not going to use it for learnership agreements as defined in tax?
    Mmmm... meaning that they will be training someone under their supervision?

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    Silver Member geraldenek's Avatar
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    Quote Originally Posted by J7J View Post
    Mmmm... meaning that they will be training someone under their supervision?

    Yes
    Geraldene Kapp
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