Ultimately, SARS ruled that: 

1. No student will meet the definition of an “employee” in section 1(1) of the ETI Act.
2. The applicant will not be entitled to claim an incentive, as contemplated in the ETI Act, in respect of any of the students.

Over the years, many companies have made use of ETI schemes to receive tax benefits afforded by ETI. However, as you have noted correctly, SARS recently issued a ruling which may change the fate of these ETI schemes by holding that a student cannot be an employee for ETI purposes.

Often in ETI schemes students were signed up to ensure a maximum ETI benefit to the clients. Some of these students were placed on new training programmes and some were current students at various training institutions. In most instances, the students never received any remuneration, but were claimed to be employees of the sponsor company.

In its July 2021 ruling, SARS held that in a scheme were the students in question were inter alia not expected to perform any work for the company, did not receive any remuneration and were mainly involved with theoretical studies at a campus, such studends did not meet the definition of “Employee” in section 1(1) of the ETI Act. One can deduct from this ruling that SARS is of the opinion that the purpose of ETI is to promote workplace exposure for the youth and not merely a theoretical education.

That said, it is rumoured that the definition of “Employee” in the ETI Act is being considered for amendment to provide greater clarity on whether a person is deemed an employee or a student. From the ruling it appears that at present if found on the facts that a person is mainly involved with studies rather than work then a company will not be eligible to claim ETI for that person.