As if there are not yet enough different types of taxes doing the rounds, Securities Transfer Tax (STT) is just another way in which SARS makes a buck.
In the past, the Stamp Duties Act, 1968, catered for the registration of transfer of unlisted securities whereas the Uncertificated Securities Tax Act, 1998, catered for the change in beneficial ownership of listed securities. These two pieces of legislation were repealed with effect from 1 April 2009 and 8 January 2008, respectively.
The Securities Transfer Tax Act, 2007 (Act No. 25 of 2007) was introduced to replace the two different tax types on securities with a single tax in respect of any transfer of listed and unlisted securities and simplify the administration thereof.
This tax type is charged at a rate of 0, 25%, which is to be applied to the taxable amount in respect of any transfer of a security. In the light of the discussion to follow, it is perhaps useful to briefly define the terms “security” and “transfer”. Security means (a) any share or depository receipt in a company; or (b) any member’s interest in a close corporation; or (c) any right or entitlement to receive any distribution from a company or close corporation, excluding the debt portion in respect of a share linked to a debenture. Transfer is defined so as to include the transfer, sale, assignment or cession, or disposal in any other manner, of a security or the cancellation or redemption of that security, but does not include—
(a) any event that does not result in a change in beneficial ownership;
(b) any issue of a security; or
(c) a cancellation or redemption of a security if the company which issued the security is being wound up, liquidated or deregistered or its corporate existence is being finally terminated.
In determining the taxable amount on which STT is payable, the following should be considered:
(a) Purchase of listed securities through or from a member:
- The consideration for which the security is purchased.
(b) Transfer of listed securities by a participant or in any other manner:
- When the security is a share or depository receipt in a company:
i. The amount of the consideration for the security declared by the person who acquired that security; or
ii. The closing price of the security where no consideration amount declared or the amount declared less
thank the lowest price on that security.
- Where the security is a right or entitlement to receive any distribution from a company/cc – the greater of:
iii. The amount of consideration declared; or
iv. The market value of the security on the date of acquisition.
(c) Transfer of unlisted securities:
- The amount or market value of the consideration given for the transfer of the security.
- Where there is no consideration given or the consideration is less than the market value of the security, the market value of the security.
- Where the security is cancelled or redeemed, the market value of that security immediately before the cancellation or redemption value must (market value must be determined as if the security was never cancelled/redeemed).
The following persons will be liable to pay STT in these specific circumstances:
(a) Purchase of listed securities through or from a member:
- The member is liable for the payment of the tax to SARS.
- The member may recover the tax payable from the persons to whom the securities are transferred or from the person that cancels or redeems the securities.
(b) Transfer of listed securities effected by a participant:
- The participant is liable for the payment of the tax to SARS.
- The participant may recover the tax payable from the persons to whom the securities are transferred or from the person that cancels or redeems the securities.
(c) Transfer of any other listed securities:
- The person to whom the listed security is transferred is liable for the tax payable.
- The tax must be paid through the member or participant holding the listed security in custody, or in the case where the listed security is not held in custody by either a member or participant, through the company that issued the listed security.
(d) Transfer of unlisted securities:
- The company which issued the unlisted security is liable for the payment of the tax to SARS.
- The company may recover the tax payable from the persons to whom securities are transferred.
In respect of the transfer of listed securities, STT must be paid by the 14th day of the month following the month during which the transfer occurred.
The STT attracted by the transfer of unlisted securities, must be paid by the Company, which issued that security, to the Commissioner within two months from the end of the month in which the transfer was effected.
One can pay STT due by effecting an electronic payment, using the SARS e-STT system, which can be accessed through their website (www.sars.gov.za). In the case of the transfer of unlisted securities, the company that issued the securities must by the end of the second month after the month during which the transfers took place submit a declaration electronically, in the form and manner as the Commissioner may determine and containing the information prescribed by the Commissioner, stating the amount of tax payable. Revenue stamps or an impressed stamp may not be used to pay Securities Transfer Tax. The only method of payment will be through the SARS e-STT system
When unlisted securities are transferred, SARS requires that notification be given in that any person to whom an unlisted security is transferred must inform the company which issued that security of the transfer within a period of 30 days as from the date of that transfer.
Should the STT due not be paid in full within the prescribed period, interest will be imposed at the rate prescribed for tax purposes on the balance of the tax outstanding, calculated from the day following the last date prescribed for payment to the date of payment to SARS.
As with all tax related documents, any company which issued unlisted securities and any member, participant or person to whom a listed security is transferred must keep for a period of five years records of every transfer to enable them to observe the requirements of the Securities Transfer Tax Act and to enable the Commissioner to be satisfied that those requirements have been observed.
As they say, for every general rule, there is an exception. There are a few exemptions applicable to STT. Should you be interested in the transactions which are exempted from STT, you are welcome to explore these on SARS’s website, as they are set out in great detail there.