The income tax deductibility of indirect empowerment measures relating to Black Economic Empowerment (BEE) in South Africa

Acker, Tim ; Nel, Rudie (2013-07)

Publication of this article was funded by the Stellenbosch University Open Access Fund.

The original publication is available at


When an entity incurs expenditure relating to indirect empowerment measures of broad-based black economic empowerment (‘BEE’) (that is the preferential procurement, enterprise development, skills development and socio-economic development categories on the BEE scorecard), there are differing opinions on whether or not these expenditure will be deductible in terms of the South African Income Tax Act. The current study considered types of expenditure and the reasons for incurring expenditure towards indirect BEE empowerment measures. Four issues were identified that could preclude a deduction in terms of the general deduction formula (section 11(a)) – notably, that expenditure has to be in the production of income. The conclusions drawn as to the deductibility of expenditure are summarised as a best practice guideline for taxpayers. Even though expenditure towards indirect empowerment measures has been found to be deductible in most cases, there are exceptions. The study concludes with proposed best practice guidelines which could provide guidance in respect of the deductible of this type of expenditure.

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