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Scholarships and grants, benefits and compensations

There are different principles for the application of tax exemption to scholarships and grants, benefits or awards. Below we are explaining the substantial differences between the payments mentioned.

Scholarships and grants

Scholarships and grants within the meaning of the Income Tax Act are future-oriented benefits, which are paid for the promotion of the acquisition of knowledge or skills, development of competences and creative or scientific activities. Scholarships and grants do not include payments, which recognise or remunerate any activities or by making which the person who made the payment acquires the rights to the work.

For example, educational establishments can pay scholarships or grants to the pupils or students in their lists of learners and income tax shall not be imposed on such scholarships or grants. The pupil or the student must be the learner in the school paying the scholarship or grant at the time when the person is specified to receive the scholarship or grant or when the agreement concerning the scholarship or grant is concluded in order to apply tax exemption. Also, tax exemption applies to the scholarships paid by the Education and Youth Authority, which is operational since August 2020.

In the case of the scholarship or grant payable by an association entered in the list of associations benefiting from income tax incentives, a public competition must be arranged and the results of such competition must be made available to the public. In this case, income tax is not be charged on the scholarship or grant. Tax exemption does not apply to the scholarship or grant payable to the person related to the association.


Income tax is not charged on benefits if the basis of payment is law or a rural municipality or city council regulation. Tax exemption does not apply to benefits for persons in alternative service, benefits to reservists and benefits paid on the basis of the European Union Common Agricultural Policy Implementation Act.

Exemption from tax does not apply to benefits payable in connection with employment relationship. For example, such benefits are the beginner’s allowance for teachers and beginner’s allowance for medical specialists.


Awards or prizes are remuneration to persons for the recognition of their previous activities. At the same time, awards are differentiated from scholarships or grants in that the scholarships and grants are future-oriented whereas the awards are paid afterwards. Income tax is not charged on international and state cultural and scientific awards and sports awards granted by the Government of the Republic.

Persons need not indicate the scholarships and grants, benefits or awards exempt from tax in their income tax returns and these do not form part of their annual income.

Remuneration (licence fee)