An interesting advance tax ruling was released by the South African Revenue Service (SARS) on 12 March 2014. Binding Private Ruling 164 (Ruling) deals with the buy-back of ordinary shares by a company at an amount in excess of the market value of the shares.
Category: Share Incentive Scheme
Valuation of pre-valuation date shares
Valuation of pre-valuation date shares – ABC (Proprietary) Limited v The Commissioner for the South African Revenue Service ABC (Pty) Ltd (Appellant), a minority shareholder in D Entity, realised a capital gain when it disposed of small percentages of its shareholding in D Entity during the 2002 and 2003 years of assessments. D Entity held a casino licence, but was involved in litigation concerning the location of the casino and had consequently not commenced operation of the casino at the time of the disposal.
The fine line between a restricted and unrestricted equity instrument
The complex tax legislation applicable to share incentive schemes has resulted in a number of taxpayers requesting advance tax rulings from the South African Revenue Service (SARS). On 30 May 2014, Binding Private Ruling No. 170 (Ruling) was released by SARS, which dealt with the question of
The fine line between a restricted and unrestricted equity instrument
The complex tax legislation applicable to share incentive schemes has resulted in a number of taxpayers requesting advance tax rulings from the South African Revenue Service (SARS). On 30 May 2014, Binding Private Ruling No. 170 (Ruling) was released by SARS, which dealt with the question of whether the conditions imposed on an employee in respect of an employee share scheme would result in the shares constituting ‘restricted equity instruments’ for purposes of s8C of the Income Tax Act, No. 58 of 1962 (Act). It is clear from the Ruling that there is often a fine line between whether or not one is dealing with a ‘restricted equity instrument’.
BINDING PRIVATE RULING – DEFINITION OF UNRESTRICTED EQUITY INSTRUMENT
BINDING PRIVATE RULING: BPR 170 DATE: 30 May 2014 ACT : INCOME TAX ACT NO. 58 OF 1962 (the Act) SECTION : SECTION 8C(7) SUBJECT : DEFINITION OF UNRESTRICTED EQUITY INSTRUMENT
Employee share incentive schemes new anti-avoidance measures
By Douglas Gaul, Tax Manager Grant Thornton Johannesburg Prior to 1 March 2014, dividends received from equity shares that were acquired by an employee as part of a share incentive scheme, were exempt from income tax (with some exceptions), even if these shares were held by a share trust on behalf of the employees. This situation has changed, and share incentive schemes must be reviewed to determine whether they still achieve the outcomes they were originally setup to deliver.
Income Tax Exemptions – Employee share schemes
As a general rule, subject to certain exceptions, local dividends received and accrued to a South African tax resident are exempt from normal tax in terms of section 10(1)(k) of the Income Tax Act, No. 58 of 1962 (the Act). One such exception applies to employee share schemes by virtue of the application of section 10(1)(k)(i)(dd). Section 10(1)(k)(i)(dd) of the Act Section 10(1)(k)(i)(dd), which was introduced from 1 January 2011, prescribes that a dividend will not be exempt from normal tax if such dividend is received or accrued in respect of a restricted equity instrument (as defined in section 8C) unless:
Exemption employee share ownership plan rulings
Introduction The tax implications for the various participants of a share incentive scheme are complex and the legislation is not necessarily clear. In recent years, share incentive schemes have been a particular focus of the South African Revenue Service (SARS) and the National Treasury, and there have been regular amendments to the tax legislation. It is no wonder that SARS is issuing a number of binding private and binding class rulings that relate to share incentive schemes. Rulings Binding Private Ruling 161 is one such recent ruling. Released on February 5 2014, the ruling deals with the income tax and employees’ tax consequences for the employer and the trust used to facilitate an employee share ownership plan (ESOP).
Employee share ownership plan ruling
Author: Andrew Lewis (Senior Associate at Cliff Dekker Hofmeyer) The tax implications for the various participants of a share incentive scheme are complex and the legislation is not necessarily clear. In recent years, share incentive schemes have been a particular focus of the South African Revenue Service (SARS) and National Treasury with regular amendments to the tax legislation. It is no wonder that we see a number of binding private and binding class rulings being issued by SARS that relate to share incentive schemes. Binding Private Ruling No 161 (BPR 161) is one such recent ruling, released on 5 February 2014, which deals with the income tax and employees’ tax consequences for the employer company and the trust used to facilitate an employee share ownership plan (ESOP).
On South African tax compliance, tax morality and taxpayers’ freedom to do tax planning – Canada, Ireland and South Africa are not worlds apart
The upcoming Budget Speech comes against the backdrop of a depressing South African growth rate, stubbornly high unemployment, a depreciating Rand (with more US tapering still to come), continued strikes in the mining sector, deadly service delivery protests and declining tax revenues. On a more positive note: In November 2013 Minister Gordhan pointed to the continued growth in tax compliance by South Africans and said: “… the ability to collect tax revenue …to finance the provision of public services and socioeconomic infrastructure has been a cornerstone of our democracy these 20 years.”