Page 79 - SAIT Compendium 2016 Volume1

s 8C INCOME TAX ACT 58 OF 1962 s 8E
‘equity instrument’ means a share or a member’s interest in a company, and includes—
(a) an option to acquire such a share, part of a share or
member’s interest;
(b) any nancial instrument that is convertible to a share
or member’s interest; and
[Para. (b) substituted by s. 11 (1) (d) of Act 60 of 2008.] (c) any contractual right or obligation the value of which is determined directly or indirectly with reference to
a share or member’s interest;
[Para. (c) added by s. 11 (1) (e) of Act 60 of 2008.] [De nition of ‘equity instrument’ amended by s. 11 (1) (b)
of Act 60 of 2008.]
‘market value’, in relation to an equity instrument— (a) of a private company as de ned in the Companies Act 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—
(f)
if the employer, associated institution in relation to the employer or other person by 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
[Words preceding sub-para. (i) substituted by s. 10 (1) of Act 31 of 2013 – substitution deemed to have come into operation on 1 May 2011 and applies in respect of equity instruments acquired on or after that date.]
(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
(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;
[De nition of ‘market value’ substituted by s. 7 of Act 20 of 2006.]
‘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;
[Para. (b) substituted by s. 12 (1) (i) of Act 31 of 2005 and by s. 11 (1) (f) of Act 60 of 2008.]
(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 which 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;
SAIT CompendIum oF TAx LegISLATIon VoLume 1
any share, other than an equity share, if—
(i) the issuer of that share is obliged to redeem that
share in whole or in part; or
(ii) that share may at the option of the holder be
redeemed in whole or in part,
within a period of three years from the date of issue of that share;
any share, other than a share contemplated in paragraph (a), if—
(i) (aa) the issuer of that share is obliged to redeem that share in whole or in part within a period of three years from the date of issue of that share;
(bb) that share may at the option of the holder be redeemed in whole or in part within a period of three years from the date of issue of that share; or
(cc) at any time on the date of issue of that share, the existence of the company issuing that share—
(A) is to be terminated within a period of
three years; or
(B) is likely to be terminated within a
period of three years upon a reasonable
[Para. (f) amended by s. 12 (1) (k) of Act 31 of 2005.] (g) which is not deliverable to the taxpayer until the happening of an event, whether xed or contingent; and
[Para. (g) added by s. 12 (1) (l) of Act 31 of 2005 and substituted by s. 11 (1) (f) of Act 35 of 2007.]
‘unrestricted equity instrument’ means an equity instrument which is not a restricted equity instrument.
[S. 8C inserted by s. 7 (1) of Act 96 of 1981, amended by s. 7 of Act 121 of 1984, repealed by s. 7 of Act 101 of 1990 and inserted by s. 8 (1) of Act 32 of 2004.]
8D . . .
[S. 8D inserted by s. 7 (1) of Act 96 of 1981, amended by s. 8 of Act 121 of 1984 and repealed by s. 8 (1) of Act 101 of 1990.]
8E Dividends on certain shares deemed to be income in relation to recipients thereof
(1) For the purposes of this section—
‘date of issue’, in relation to a share in a company, means the date on which—
(a) the share is issued by the company;
(b) the company at any time after the share has been
issued undertakes the obligation to redeem that share
in whole or in part; or
(c) the holder of the share at any time after the share has
been issued obtains the right to require that share to be redeemed in whole or in part, otherwise than as a result of the acquisition of that share by that holder;
‘ nancial instrument’ means any—
(a) interest-bearing arrangement; or
(b) nancial arrangement based on or determined with
reference to a speci ed rate of interest or the time
value of money;
‘hybrid equity instrument’ means—
(a)
(b)
71
INCOME TAX ACT – SECTIONS