Page 513 - SAIT Compendium 2016 Volume2

IN 55 (2) Income Tax acT: InTeRPReTaTIon noTes IN 55 (2)
(iv) immediately before that taxpayer dies, if all the restrictions relating to that equity instrument are or may be lifted on or after death; and
(v) the time a disposal contemplated in subsection (2) (a) (i) or (b) (i) occurs.
(4) (a) If a taxpayer disposes of a restricted equity instrument which was acquired in the manner contemplated in
subsection (1) for an amount which consists of or includes any other restricted equity instrument in the employer of the taxpayer or an associated institution in relation to the employer, that other restricted equity instrument acquired in exchange is deemed to be acquired by that taxpayer by virtue of his or her employment or of ce of director of any company.
(b) If the amount received or accrued in respect of the restricted equity instrument which is disposed of as contemplated in paragraph (a) includes any payment in a form other than restricted equity instruments, that payment less any consideration attributable to that payment must be deemed to be a gain or loss which must be included in or deducted from the income of the taxpayer in the year of assessment during which that restricted equity instrument is so disposed of.
(5) (a) If a restricted equity instrument which was acquired by a taxpayer in the manner contemplated in subsection (1) is disposed of by that taxpayer to any person—
(i) otherwise than by or under a disposal made in terms of a transaction at arm’s length; or
(ii) who is a connected person in relation to that taxpayer, the provisions of subsection (2), (3) and (4) apply mutatis mutandis in the determination of any gain or loss made by that person as if that person had been the taxpayer, and that gain or loss is for purposes of subsection (1) deemed to be made by that taxpayer in respect of the vesting of
that equity instrument.
(b) If an equity instrument was acquired by any person other than the taxpayer by virtue of the taxpayer’s employment
or of ce of director, that equity instrument must, for purposes of this section, be deemed to have been so acquired by that taxpayer and disposed of to that person in the manner contemplated in paragraph (a).
(c) Paragraph (a) does not apply where a taxpayer disposes of any restricted equity instrument (including by way of forfeiture, lapse or cancellation) to his or her employer, an associated institution or other person by arrangement with the employer in terms of a restriction imposed in relation to that equity instrument for an amount which is less than the market value of that restricted equity instrument.
(6) If a person who acquires a restricted equity instrument from the taxpayer as contemplated in subsection (5), disposes of that restricted equity instrument to any other person in the manner contemplated in subsection (5) (a) (i) or to a connected person in relation to the taxpayer, subsection (5) applies in respect of that other person as if he or she had acquired that restricted equity instrument directly from that taxpayer.
(7) For the purposes of this section, unless the context otherwise indicates—
‘associated institution’ means an associated institution as contemplated in paragraph 1 of the Seventh Schedule; ‘consideration’ in respect of an equity instrument means any amount given or to be given (otherwise than in the
form of services rendered or to be rendered or anything done, to be done or not to be done)—
(a) by the taxpayer in respect of that equity instrument,
(b) by the taxpayer in respect of any other restricted equity instrument which had been disposed of by that taxpayer
in exchange for that equity instrument, reduced by any amount attributable to the gain or loss determined in terms
of subsection (4) (b); or
(c) by any person contemplated in subsection (5) (a) or (b) in respect of that restricted equity instrument to the extent
that the amount does not exceed the amount the taxpayer would have been disposed of by him or her, but does not
include any amount given or to be given by that person to the taxpayer to acquire that restricted equity instrument:
Provided that where a taxpayer acquires—
(a) an equity instrument in exchange for any other equity instrument, as contemplated in subsection (4) (a), the market value of the equity instrument, as contemplated in subsection (4) (a), the market value of the equity instrument given in exchange must not be taken into account in determining the consideration in respect of the equity instrument so acquired; or
(b) a right to acquire any marketable security in exchange for any other such right, as contemplated in section 8A (5), and the right so acquired constitutes an equity instrument acquired in the manner contemplated in subsection (1), the consideration for that equity instrument must be determined as if it was acquired in the manner contemplated in subsection (4) (a);
‘employer’ means an employer as contemplated in paragraph 1 of the Seventh Schedule;
‘equity instrument’ means a share or part thereof in the equity share capital of a company or a member’s interest in a company which is a close corporation, and includes—
(a) an option to acquire such a share, part of a share or member’s interest; and
(b) any other nancial instrument that is convertible to a share, part of a share or member’s interest; and
(c) any contractual right or obligation the value of which is determined directly or indirectly with reference to a share or member’s interest;
‘market value’ in relation to an equity instrument—
(a) of a private company contemplated in section 20 of the Companies Act, 1973 (Act 61 of 1973), or a company that
would be regarded as a private company if it were incorporated under that Act, means an amount determined as its value in terms of a method of valuation—
(i) prescribed in the rules relating to the acquisition and disposal of that equity instrument;
(ii) which is regarded as a proxy for the market value of that equity instrument for the purposes of those rules;
and
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