On 29 February 2012, the South African Revenue Service (SARS) issued a notice in Government Gazette No 35090 (Notice No 173) relating to the liability of certain institutions, most notably banks, to furnish SARS with financial information about taxpayers. The notice was issued in terms of s69 of the Income Tax Act, No 58 of 1962, which section has been superseded by s26 of the Tax Administration Act, No 28 of 2011 (TAA).
Category: Share Incentive Scheme
Anti-avoidance: share repurchases through subsidiaries
Judgment was handed down on 16 November 2012 by the Tax Court in the case of A Ltd v Commissioner for the South African Revenue Service. The facts were as follows. A Ltd was a company listed on the JSE
Avoidance as accepted practice – Commissioner for the South African Revenue Service v NWK Ltd 2011 (2) SA 67 (SCA)
Judgment was handed down in the important case of Bosch and McCleland v Commissioner for the South African Revenue Service on 20 November 2012 by a full bench of the Western Cape High Court (a case we have previously reported on).
High Court interprets NWK judgment
Judgment in the case of Mariana Bosch and Ian McClelland v Commissioner for the South African Revenue Service (case no A94/2012) was handed down on 20 November 2012 by a full bench of the Western Cape High Court. The main judgment was written by Davis J (Baartman J concurring) and a separate judgment was written by Waglay J. The matter was on appeal from the Tax Court.
Sent packing – Sent v Commissioner of Taxation [2012] FCA 382)
Mr Eduard Sent (Sent) was sent packing by the Federal Court of Australia (FCA) on 16 April 2012, in an appeal against a decision by the Administrative Appeals Tribunal (Tribunal) on whether some or all of a payment of $11,600,000 to an executive share trust (Trust) was assessable as income in the hands of Sent (Sent v Commissioner of Taxation [2012] FCA 382). While the taxation of share incentive schemes in Australia differs from the position in South Africa, the case does highlight certain principles that are equally applicable in South Africa.
Disastrous tax consequences for share incentive schemes
The current wording of the tax legislation has the result that both employers and participants in share incentive schemes will suffer substantial negative tax consequences when participating in these types of schemes that are actually designed to incentivise employees and to align their interest with the employer companies.
Withholding employees' tax in respect of an incentive scheme
The South African Revenue Service (SARS) recently released Binding Private Ruling 117 in which it had to be considered whether, and by whom, employees’ tax had to be withheld in respect of certain share options granted to employees in circumstances where the employer and the person granting the share options are not the same person.
The perils of share incentive schemes for employers
A lot of focus has been placed on the tax implications that flow from an employee’s participation in share incentive schemes. However, employers need to be aware of the potential tax consequences that may arise where such schemes are not administered in accordance with the provisions of Income Tax Act, Act 58 of 1962 (“the Act”).
Dividends now taxable in certain share incentive schemes
Companies must ensure that dividends declared to their employees after 1 January 2011 as part of their employee share incentive schemes are still exempt from income tax otherwise companies and their employees may be in for a surprise.
Share incentive schemes vs equity shares – round 2
In a previous article we drew attention to the proposed amendments to section 10(1)(k) of the Income Tax Act, 1962 (“the Act”), in terms of which the legislature sought to tax all dividends declared on any “restricted equity instrument” for purposes of section 8C of the Act.