Page 77 - SAIT Compendium 2016 Volume1

s 8B INCOME TAX ACT 58 OF 1962 s 8C
(i) a restriction imposed by legislation;
(ii) a right of any person to acquire those equity shares from the employee or former employee who acquired the equity shares as contemplated
in paragraph (a)—
(aa) in the case where the employee or former
employee is or was guilty of misconduct or poor performance, at the lower of market value on the date of grant or the market value on the date of acquisition by that employer; or
(bb) in any other case, at market value on the date of acquisition by that person; or
[Sub-para. (ii) substituted by s. 11 (1) (e) of Act 31 of 2005, by s. 6 (1) (b) of Act 20 of 2006 and by s. 10 (1) (c) of Act 60 of 2008.]
(iii) a restriction in terms of which the employee or former employee who acquired the equity shares as contemplated in paragraph (a) may not dispose of those equity shares for a period, which may not extend beyond ve years from the date of grant;
[Sub-para. (iii) substituted by s. 11 (1) (e) of Act 31 of 2005, by s. 6 (1) (b) of Act 20 of 2006 and by s. 10 (1) (c) of Act 60 of 2008.]
‘date of grant’ in relation to an equity share means the date on which the granting of that equity share is approved by the directors of the employer company or some other person or body of persons with comparable authority;
[De nition of ‘date of grant’ substituted by s. 11 (1) (b) of Act 7 of 2010.]
‘gain’ in relation to the disposal by a person of a qualifying equity share or a right or interest in a qualifying equity share, means the amount by which any amount received by or accrued to that person from that disposal exceeds the consideration given by him or her for that qualifying equity share, right or interest (otherwise than in the form of services rendered or to be rendered or anything done or to be done or not to be done);
[De nition of ‘gain’ inserted by s. 11 (1) (f) of Act 31 of 2005.] ‘market value’ in relation to an equity share means the price which could be obtained upon the sale of that equity share between a willing buyer and a willing seller dealing freely at arm’s length in an open market and without having regard to
any restrictions imposed in respect of that equity share; ‘qualifying equity share’, in relation to a person, means an equity share acquired in a year of assessment in terms of a broad-based employee share plan, where the market value of all equity shares (as determined on the relevant date of grant of each equity share and excluding the market value of any qualifying equity share acquired in the circumstances contemplated in subsection (2A)), which were acquired by that person in terms of that plan in that year and the four immediately preceding years of
assessment, does not in aggregate exceed R50 000.
[De nition of ‘qualifying equity share’ substituted by s. 11 (1) (g) of Act 31 of 2005, amended by s. 2 (2) (b) of Act 8 of 2007 and by s. 1 (2) (c) of Act 3 of 2008 and substituted by s. 10 (1) (d) of Act 60 of 2008.]
(4) The provisions of section 25 do not apply in respect of any amount received or accrued from the disposal of any qualifying equity share after the date of death of the person contemplated in subsection (1).
[S. 8B inserted by s. 6 (1) of Act 104 of 1980, amended by s. 6 of Act 121 of 1984, repealed by s. 6 (1) of Act 101 of 1990 and inserted by s. 8 (1) of Act 32 of 2004.]
8C Taxation of directors and employees on vesting of equity instruments
(1) (a) Notwithstanding sections 9C and 23 (m), a taxpayer must include in or deduct from his or her income
SAIT CompendIum oF TAx LegISLATIon VoLume 1
for a year of assessment any gain or loss determined in terms of subsection (2) in respect of the vesting during that year of any equity instrument, if that equity instrument was acquired by that taxpayer—
[Words in para. (a) preceding sub-para. (i) substituted by s. 6 of Act 43 of 2014 – date of commencement:
20 January 2015.]
(i) by virtue of his or her employment or of ce of director of any company or from any person by arrangement with the taxpayer’s employer;
(ii) by virtue of any restricted equity instrument held by that taxpayer in respect of which this section will apply upon vesting thereof; or
[Sub-para. (ii) substituted by s. 12 (1) (b) of Act 7 of 2010.] (iii) as a restricted equity instrument during the period of his or her employment by or of ce of director of any
company from—
(aa) that company or any associated institution in
relation to that company; or
(bb) any person employed by or that is a director of—
(A) that company; or
(B) any associated institution in relation to that
company.
[Sub-para. (iii) added by s. 12 (1) (c) of Act 7 of 2010.] [Para. (a) substituted by s. 12 (1) (a) of Act 31 of 2005 and
amended by s. 11 (1) (a) of Act 35 of 2007.]
(b) This section does not apply in respect of any equity
instrument which—
(i) was acquired by the exercise or conversion of, or
in exchange for the disposal of, any other equity instrument where this section applied in respect of the vesting of that other equity instrument before that exercise, conversion or exchange; or
[Sub-para. (i) substituted by s. 12 (1) (b) of Act 31 of 2005.] (ii) constitutes a qualifying equity share contemplated in
section 8B.
(1A) If a return of capital or foreign return of capital,
other than a return of capital or foreign return of capital by way of a distribution of an equity instrument, is received by or accrues to a taxpayer in respect of a restricted equity instrument, the taxpayer must include the amount of the return of capital or foreign return of capital in his or her income for the year of assessment during which the amount is received or accrues.
[Sub-s. (1A) inserted by s. 11 (1) (a) of Act 60 of 2008 and substituted by s. 12 (1) (d) of Act 7 of 2010 and by s. 19 (1) of Act 24 of 2011 – date of commencement: 1 April 2012.]
(2) (a) The gain to be included in the income of a taxpayer—
(i) in the case of—
(aa) a disposal contemplated in subsection (5) (c); or (bb)a disposal by way of release, abandonment
or lapse of an option or nancial instrument contemplated in paragraph (a) or (b) of the de nition of ‘equity instrument’,
is the amount received or accrued in respect of that disposal which exceeds the sum of any consideration in respect of that equity instrument; or
(ii) in any other case, is the amount by which the market value of the equity instrument determined at the time that it vests in that taxpayer exceeds the sum of any consideration in respect of that equity instrument.
(b) The loss to be deducted from the income of a taxpayer—
(i)
in the case of—
(aa) a disposal contemplated in subsection (5) (c); or (bb)a disposal by way of release, abandonment
or lapse of an option or nancial instrument 69
INCOME TAX ACT – SECTIONS