Page 78 - SAIT Compendium 2016 Volume1

s 8C INCOME TAX ACT 58 OF 1962 s 8C
contemplated in paragraph (a) or (b) of the
de nition of ‘equity instrument’,
is the amount by which the sum of any consideration in respect of that equity instrument exceeds the amount received or accrued in respect of that disposal; or
(ii) in any other case, is the amount by which the consideration in respect of the equity instrument exceeds the market value of that equity instrument determined at the time that it vests in that taxpayer.
[Sub-s. (2) substituted by s. 12 (1) (c) of Act 31 of 2005.] (3) An equity instrument acquired by a taxpayer is deemed
for the purposes of this section to vest in that taxpayer— (a) in the case of the acquisition of an unrestricted equity
instrument, at the time of that acquisition; or
(b) in the case of the acquisition of a restricted equity
instrument, at the earliest of—
(i) when all the restrictions, which result in that
equity instrument being a restricted equity
instrument, cease to have effect;
(ii) immediately before that taxpayer disposes of that
restricted equity instrument, other than a disposal
contemplated in subsection (4) or (5) (a), (b) or (c); [Sub-para. (ii) substituted by s. 12 (1) (d) of Act 31 of 2005.]
(iii) immediately after that equity instrument, which is an option contemplated in paragraph (a) of the de nition of ‘equity instrument’ or a nancial instrument contemplated in paragraph (b) of that de nition, terminates (otherwise than by the exercise or conversion of that equity instrument);
[Sub-para. (iii) substituted by s. 12 (1) (d) of Act 31 of 2005.] (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
[Sub-para. (iv) substituted by s. 12 (1) (d) of Act 31 of 2005 and by s. 11 (1) (c) of Act 35 of 2007.]
(v) the time a disposal contemplated in subsection (2) (a) (i) or (b) (i) occurs.
[Sub-para. (v) added by s. 11 (1) (d) of Act 35 of 2007.] (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.
[Para. (a) substituted by s. 12 (1) (e) of Act 7 of 2010.] (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.
[Sub-s. (4) substituted by s. 12 (1) (e) of Act 31 of 2005.] (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 subsections (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.
[Para. (c) substituted by s. 12 (1) (f) of Act 31 of 2005.]
(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 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
[Para. (b) substituted by s. 12 (1) (g) of Act 31 of 2005 and
(c)
by s. 11 (1) (e) of Act 35 of 2007.]
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 had to give to acquire that equity instrument had it not been disposed of or deemed to 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:
[Para. (c) substituted by s. 11 (1) (e) of Act 35 of 2007.] 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 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);
[De nition of ‘consideration’ amended by s. 12 (1) (h) of Act 31 of 2005.]
‘employer’ means an employer as contemplated in paragraph 1 of the Seventh Schedule;
70 SAIT CompendIum oF TAx LegISLATIon VoLume 1