Page 514 - SAIT Compendium 2016 Volume2

IN 55 (2) Income Tax acT: InTeRPReTaTIon noTes IN 55 (2)
(iii) used consistently to determine both the consideration for the acquisition of that equity instrument and the price of the equity instrument repurchased from the taxpayer after it has vested in that taxpayer; or
(b) of any other company, means the price which could be obtained upon the sale of that equity instrument between a willing buyer and a willing seller dealing freely at arm’s length in an open market and, in the case of a restricted equity instrument, had the restriction to which that equity instrument is subject not existed;
‘restricted equity instrument’ in relation to a taxpayer means an equity instrument—
(a) which is subject to any restriction (other than a restriction imposed by legislation) that prevents the taxpayer from
freely disposing of that equity instrument at market value;
(b) which is subject to any restriction that could result in the taxpayer—
(i) forfeiting ownership or the right to acquire ownership of that equity instrument otherwise than at market value; or
(ii) being penalised nancially in any other manner for not complying with the terms of the agreement for the acquisition of that equity instrument;
(c) if any person has retained the right to impose a restriction contemplated in paragraph (a) or (b) on the disposal of that equity instrument;
(d) which is an option contemplated in paragraph (a) of the de nition of ‘equity instrument’ and where the equity instrument can be acquired in terms of that option will be a restricted equity instrument;
(e) which is a nancial instrument contemplated in paragraph (b) of the de nition of ‘equity instrument’ and where the equity instrument to which that nancial instrument can be converted will be a restricted equity instrument;
(f) if the employer, associated institution in relation to the employer or other person by the arrangement with the employer has at the time of acquisition by the taxpayer of the equity instrument undertaken to—
(i) cancel the transaction under which that taxpayer acquired the equity instrument; or
(ii) repurchase that equity instrument from that taxpayer at a price exceeding its market value on the date of
repurchase, if there is a decline in the value of the equity instrument after that acquisition; or
(g) which is not deliverable to the taxpayer until the happening of an event, whether xed or contingent, and
‘unrestricted equity instrument’ means an equity instrument which is not restricted equity instrument. Section 10 (1) (nD) – Exemptions
Paragraph 1 of the Fourth Schedule – De nitions
Paragraph 11A of the Fourth Schedule – Remuneration of an employee
(1) Where by virtue of the provisions of paragraph (b), (d) or (e) of the de nition of ‘remuneration’ in paragraph 1, the remuneration of an employee includes—
(a) any gain made by the exercise, cession or release of any right to acquire any marketable security as contemplated
in section 8A;
(b) any gain made from the disposal of any qualifying equity share as contemplated in section 8B; or
(c) any gain made are a result of the vesting of any equity instrument as contemplated in section 8C,
the amount of that gain must for the purposes of this Schedule be deemed to be an amount of remuneration which is payable to that employee by the employer by whom that right was granted, or from whom that equity instrument or qualifying equity share was acquired, as the case may be.
(2) Employees’ tax in respect of the amount of remuneration contemplated in subparagraph (1) must, unless the Commissioner has granted authority to the contrary, be deducted or withheld by that employer from any consideration paid or payable by him or her to that employee in respect of the cession or release of that right or the disposal of that equity instrument of qualifying equity share, as the case may be, or from any cash remuneration paid or payable by that employer to that employee after that right has to the knowledge of that employer been exercised, ceded or released or that equity instrument has to the knowledge of that employer vested or that qualifying equity share has to the knowledge of that employer been disposed of. Provided that where that person—
(i) is an ‘associated institution’, as de ned in paragraph 1 of the Seventh Schedule, in relation to any employer who pays or is liable to pay to that employee any amount by way of remuneration during the year of assessment during which the gain contemplated in subparagraph (1) arises; and
(ii) is or will be unable, for the reason described in subparagraph (5), to deduct or withhold the amount of employees’ tax or part of it in respect of that gain during that year of assessment,
that person and that employer must deduct or withhold from the remuneration payable by them to that employee during that year of assessment an aggregate amount equal to the employee’s tax payable in respect of that gain shall be jointly and severally liable for that employee’s tax.
any amount received by or accrued to that person which constitutes—
(i) an equity instrument contemplated in section 8C acquired by that person and in respect of which that section
applies; or
(ii) consideration for the disposal of an equity instrument contemplated in subparagraph (i),
which had not yet vested as contemplated in that section at the time of that acquisition or disposal;
’remuneration’ means (e) any gain determined in terms of section 8C which is required to be included in the income of that person;
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